Whats a good ROI to offer a private investor

7 Replies

I have a potential investor that i would like to work with but i would like to know how to setup a deal that's a Win Win for the both of us .. How do i determine a good ROI for the investor if I'm asking this right ??

What are the investor's alternatives?  What are their needs?  What is the risk profile?

This has been discussed to death... there is no 1 size fits all answer.

If you want a starting point... offer 1 - 2% more than what you could get from a bank.

hello Nathan thank you for taking the time to reach out i appreciate it .. I'm a rookie still learning so forgive me for asking .. 

Investor alternatives? Risk Profile ? could you explain this to me ?

Here's a forum thread that could help - this allows you to look into the mind of a private lender (which deal he approves, what is risky and safe loan to make, etc.). By knowing this, you might be able to intelligently talk to your private investor.

http://www.biggerpockets.com/forums/522/topics/161435-real-life-of-a-private-lender?page=1

Originally posted by @Marcus Johnson :

hello Nathan thank you for taking the time to reach out i appreciate it .. I'm a rookie still learning so forgive me for asking .. 

Investor alternatives? Risk Profile ? could you explain this to me ?

 Is the investor just going to stick it in a savings account and collect 0.09% interest?  Are they retired and going to use CDs to get a few points higher?  Are they able to use the stock market to get 8% long term results?  Are they investors who can leverage cash into 10 - 20% returns?

RIsk profile? A savings account and CDs have about 0 risk... stock market can drop... investors can lose their shirts. What risk are you offering? Is it long term money or short term? What's the collateral? Do you know what you're doing? What's the LTV? What's the exit strategy for them if things don't go right? How risky is investing with you versus their other options?

You also need to discuss liquidity with them.  Will they need to be able to quickly get to their money, not everyone wants it locked up in a 30 year loan.

Wendell Thanks for your information i appreciate you taken the time to help me I'm  very grateful ..

I learned the hard way that I attracted fewer private money investors when I offered to pay higher interest rates and points.  If I made my return modest (6 to 8% & 1 or 2 points) it was more realistic and not "to good to be true"!

If you are asking investor to just put up money,10% return they may want it secure by real estate.