Fair Private Money Terms

[Matt Cupp]

Purchase price is $83,400.

Rehab is $8,600

Total investment is $91,000.

ARV is $115,000 - $120,000

Would clear $111,000 - $116,000

Profit between $20,000 - $25,000

Turn time should be 90 days closed.

I have 50% and borrowing the other $45,500.

I've procured the deal and will be managing the rehab. The $45,000 loan is just funding.

I'm maybe overthinking because of the small $ amount return for the lender if we do a few points and interest.... yet what's a common and fair agreement with the lender to make it worthwhile for everyone?

[Will Barnard]

Originally posted by @Damian Bialonczyk:

@Matt Cupp

You could reasonably expect 10-13% interest, 2 points, and 6-9 month terms. 

These would be hard money rates, not private money as they would exceed the maximum usury limits in TN which are fairly strict and low. Big difference between hard money and private money.

As to the deal, your acquisition plus rehab is $92k, not $91k and that is a very small figure for rehab, must be in pretty good condition already. The spread on this deal is very tight too but I guess if you are certain on the rehab and exit numbers, plus you can get in and out in 90 days, then it is certainly possible but your profit will not be as you posted since you should incur real estate agent fees, closing costs, holding costs (utilities, taxes, insurance), and debt service costs. Very very tight deal.