We're lending a house flipper $20k at 15% for 60 days...thoughts?
Hello! This is my first post on BP but I've been reading articles for a while now.
We are new to the REI world but my husband's brother owns a small rental property and has a team of brokers and a lawyer who he works with. Through his connections, he was introduced to a professional realtor by trade who specializes in short term house flips. Her usual lender was tapped out and she needed a small loan. We agreed to lend her $20,000 to be paid back after 60 days at 15% interest. She is putting a property she owns free and clear as collateral. The lawyer reviewed the paperwork and has blessed it.
As our first foray into real estate, this deal seems too good to be true. The only thing we have to do is transfer money to someone and 2 months later we will get it back, plus 15% interest, and if she doesn't pay, we get to put a lien on a house worth $75k. As a healthy skeptic, when something seems too good to be true, I assume it probably is.
So, question to the more experienced among you, and any other private lenders out there: What are the hazards of this approach? Any things we should be paying attention to that might have been overlooked? Does this sound like a "good deal"? Are there any red flags we should look for?
My husband doesn't know I am posting about this, and he trusts his brother, but I believe it's always a good idea to seek outside advice and I've found this community to be supportive and knowledgeable. Any feedback you can offer is much appreciated!!
Thank you!