Hello BP Community,
I am in the Chicagoland Market and I am really trying to find a private lender to work with on some flip deals. I have been propositioned a few times with some new ways of getting started. I just wanted some others opinions on these partnership offers I have come across. *Credit Partners in which I will become a credit partner on some flips to build up my name to a lender and receive a small portion of the proceeds. Loan origination fees 15% points on the loan 3% 4-6 month duration and to cover rehab cost taking out lines of credit. I wanted to know how common is these credit partner contracts in real strategies to flip real estate? It seems like this is could potentially be an excessive debt to take on all of one 15% loan origination fees? Is that a fair interest rate for hard money? Any feedback is appreciated from investors who have knowledge of dealing with hard money lenders for the first time or actual hard money lenders themselves. Thanks BP
15points is crazy for any kind of deal. As a new investor you should not pay more than 3 or 4points at most. I dont know what the interest rate is for hard money lenders is for your area, but it will probably be about 10% to 15%.
Focus on finding great deals. When you find one, the local lenders will know that you have a deal and will lend appropriately. If YOU need to, you can bring in a partner to help your deal, not you helping someone else to build up your credit with someone else's deal.
You probably need to be a part of some local meetups so that you can talk with people who are already doing deals. Take them to lunch and ask them some questions about how their deals are done.
As someone who has done hard-money loans (gotten hard-money loans or similar financing) and worked JV's with more experienced (and less experienced) investors, that all seems very convoluted and complex. Honestly, I wouldn't waste time thinking about a "credit partner".
HML is a valid option though, but it should really only be a few points an and 10 to 12% interest. Keep in mind, it's not necessarily out of the kindness of the HML heart to take a chance on you, if you default, they can foreclose and get the property.
Like @Rick Pozos , if you have a great deal it shouldn't be hard to find a partner or hard-money lender. Keep in mind, partners have experience, want to get paid, and if you a great deal you can probably get a minimum of 25% if they are managing and paying for a good contract. I don't mean bird-dogging, you might be lucky to get 10% in that scenario. People contact me everyday with horrible leads or contracts to the point I can barely respond. I respect the hustle of people seeking to partner or get a loan - but you will build better relationships by being picky on what deals you present.
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