How to structure private money lending ?

Question

Trying to figure out how to Structure a private money lending such as Interest-rate,how long of term,and any thing else you can think of thanks

Grigory Pekarsky · Answer

Private money lending is a complex process with many variables. The most important variable in the process of determining what to charge for interest rates is the riskiness of the loan.

To calculate the interest rate on a loan, you need to use three things:

1. Risk free interest rates

2. Default rate

3. Loan duration in years

Risk Free Interest Rates are the interest rates that can be earned on an investment which comes with no or very low amount of risk to its holder (e.g government bonds). Risk free interest rates are usually calculated by taking the average of market yields for relevant bonds (of similar terms) over a period of time e.g 6 months, 1 year etc.

Jared Christensen · Answer

@Landon Bleau okay thanks for the help

Landon Bleau · Answer

Jared, you would have to figure out what your private money lender is comfortable with.  Some may want a 5% interests rate and be willing to lend you the money on a 5 year balloon term, some might want a higher interest rate with a longer term, some might want equity in the property.  You just have to find a great deal and present lenders with an opportunity, then see what kind of deal you can work up with them on the property.  There is nothing set in stone, as long as the numbers work, close the deal!