Virginia Beach, VA · Member since 2017 · 13 posts · 2 votes
How much should I expect a hard money lender or family member to get back on their investment? Investor ROI? In today's market you don't stand a chance if you don't have a cash offer so I'm choosing to buy an investment vacation rental with either family members or hard lenders in order to stand a chance to purchase the deal. How should the deal be arranged if I'm only going to keep their money for 5 months
If at all possible, borrow private/hard money for six months and a day. Nearly all banks require a six-month seasoning period to get into a traditional loan product at appraised value.
Other than that, I have two private loans out right now. One is with a friend of a friend at 14% simple. The other is with my in-laws at 5% simple. On my previous deal I borrowed a loan from one of my closest friends at 14% simple. At 14%, I'm beating hard money rates by about 4% simple on average, so it's an effective way for me to give to people I care about while helping keep costs low enough that I can refinance and leave no money in my deals.
If you're simply trying to get cash to buy retail, these numbers won't work for you, but you also may be overestimating the importance of all cash. If you make an offer with higher earnest money and an approval letter, you should still get plenty of interest from sellers. Best of luck!
For the numbers you gave in regards to the 14% And 5% that you are investors were making, is that based on yearly rates or a flat rate no matter how long you keep their cash?