Lending hard money loan, need advice
Hi all.
My real estate agent buddy, whom I've known for a long time, wants me to loan him $7500 for a max of 45 days to pay off his contractors while his investment property flip closes. I don't have any reason to distrust his intentions as he's helped me close on a few deals and he lives and owns right around the corner; ie: he's low risk for fleeing the state for this amount.
I had him write up a contract that says the following:
This agreement covers the personal loan provided by (loaner) to (borrower), signed into effect on x x , 2020. The terms of the agreement are as follows:
-(loaner) will loan (borrower) $7,500 (principal loan)
-(borrower) will repay (loaner) the principal loan amount of $7,500 plus 10% interest of the principal loan ($750) which brings the total repayment to $8,250.
-(borrower) will have 45 days from the day the money is received to repay the loan & interest total of $8,250 to (loaner)
-The money will be used for (borrower)s investment property, at (address) for roofing, staging, lender dues, and materials/supplies
-If (borrower) is not able to pay the loan back within 45 days, an additional $500 penalty will be assessed for every 15 additional days it takes to repay the loan in full. For example, if it takes 60 days to pay the loan back for example, (borrower) will owe (loaner)$7,500 principal + $750 interest + $500 penalty = $8,750. If it takes 75 or less days there will be a $1,000 penalty. This penalty amount continues to increase by $500 for every 15 days outstanding until the loan is repaid.
We will both then sign the agreement.
Pretty straightforward but am I not considering something to protect me, like actual collateral? Any advice would helpful.