Private Lender Terms

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Private Lender Terms

Cristen Bozeman
New York City, NY · Member since 2016 · 3 posts · 1 vote

Hi All,

As a newbie RE investor. Can someone share insight on a standard or common structure for loan terms when you are a private lender? Please share resources as well so that I can continue to learn independently.

Thanks in advance!

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Jeremy C.
Rental Property Investor · Member since 2020 · 11 posts · 7 votes
5y

Let me share the arrangement I am doing with my PML. I do not think this represents the majority of how others structure their deals, but that’s the great thing about PML-you agree on the terms. 

He is a mentor of mine as well, and is not so interested in making money but rather he told me that he likes to see 7% in his passively invested accounts, so I offered and he accepted that I would pay him 8% APY On the principal that I borrowed. 

I.e. if I borrow 100k for a BRRRR (purchase plus rehab) and borrow the money for 9 months (purchase and 6 month seasoning before cash-out refi) he is totally fine with me giving him a lump sum after 9 months of $105,941.

I think these kind of terms are very relationship-based, but try and see what they are open to!

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  • Jeremy C.
    Rental Property Investor · Member since 2020 · 11 posts · 7 votes
    5y

    Let me share the arrangement I am doing with my PML. I do not think this represents the majority of how others structure their deals, but that’s the great thing about PML-you agree on the terms. 

    He is a mentor of mine as well, and is not so interested in making money but rather he told me that he likes to see 7% in his passively invested accounts, so I offered and he accepted that I would pay him 8% APY On the principal that I borrowed. 

    I.e. if I borrow 100k for a BRRRR (purchase plus rehab) and borrow the money for 9 months (purchase and 6 month seasoning before cash-out refi) he is totally fine with me giving him a lump sum after 9 months of $105,941.

    I think these kind of terms are very relationship-based, but try and see what they are open to!

    3Reply
  • Cristen Bozeman
    OP
    New York City, NY · Member since 2016 · 3 posts · 1 vote
    5y
    Thank you for the below example it is really helpful!
    Originally posted by @Jeremy C.:

    Let me share the arrangement I am doing with my PML. I do not think this represents the majority of how others structure their deals, but that’s the great thing about PML-you agree on the terms. 

    He is a mentor of mine as well, and is not so interested in making money but rather he told me that he likes to see 7% in his passively invested accounts, so I offered and he accepted that I would pay him 8% APY On the principal that I borrowed. 

    I.e. if I borrow 100k for a BRRRR (purchase plus rehab) and borrow the money for 9 months (purchase and 6 month seasoning before cash-out refi) he is totally fine with me giving him a lump sum after 9 months of $105,941.

    I think these kind of terms are very relationship-based, but try and see what they are open to!

    0Reply
  • Erin Elam
    Little Elm, TX · Member since 2014 · 356 posts · 47 votes
    2y

    Adding to this thread.... can someone share what numbers look like when you borrow from a PML for down payment on a BRRRR? I've heard several podcasts including Amy Majoory and the Polites who talk about using OPM for down payments but I still don't understand the logistics when the PML is only for the down payment, but the other funds are borrowed from another entity.

    For example: how do you structure the PML plus the actual purchase/rehab loan and still make money? Do you pay the PML only when you refi? Are interest only payments made to both the PML and a HML/bank during the rehab? How/when do both lenders get paid back in full?

    Hope this makes sense ... TIA

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2y
    Quote from @Erin Elam:

    Adding to this thread.... can someone share what numbers look like when you borrow from a PML for down payment on a BRRRR? I've heard several podcasts including Amy Majoory and the Polites who talk about using OPM for down payments but I still don't understand the logistics when the PML is only for the down payment, but the other funds are borrowed from another entity.

    For example: how do you structure the PML plus the actual purchase/rehab loan and still make money? Do you pay the PML only when you refi? Are interest only payments made to both the PML and a HML/bank during the rehab? How/when do both lenders get paid back in full?

    Hope this makes sense ... TIA

    Your post makes sense ..  your asking for 100% funding and that is rare to the extreme most fokls that get this funding do so from family friends or very close associates that know like and trust them.  or you can jump on Pace Morby's free facebook and talk to all those folks who swear they do this .. but it is the blind leading the blind not sure how much actually happens..

    Also your a prime target for fake lenders IE scammers and Crooks who will tell you they can do it your all approved we just need 500.0o or 1000.00 up front to get to the next level. you pay it they try to bleed you for as much as they can and then ghost you and your out your money. Very common scam in the US RE space today.. so do be careful what your asking for does not happen in a business setting.

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  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    2y

    For these types of questions - it would make sense to start by getting some quotes and term sheets from actual hard money lenders (larger companies, found via google or the directory on BP) - can still do the private money - but these terms they give you can easily be the starting point - and you will likely get a lender to walk you through them for free anyway

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  • Brett Flory
    Member since 2023 · 2 posts · 0 votes
    2y

    There are so many different ways to structure each deal.  The main focus you should have is that the higher the risk you have, the higher return you should be expecting.  My network of private money lenders do get high returns, but it is not without a lot of due diligence and structuring.

    0Reply
  • Anderson S.Business Member
    Lender · Brooklyn, NY · Member since 2024 · 209 posts · 50 votes
    2y

    As always it depends on the deal/project you're working on. Glad to chat more!

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