When using hard money loans what’s the avg ROI for the investor

Question

Hey guys so I have someone who’s looking to invest with me and let me use $30,000 of their money.

My question is what’s the average return on investment? My plan is to paint a good and clear pic on what to expect and how much of a return he’ll receive.

My next question is when talking to him initially he mentioned he like getting his money back fast. Is Brrr a good strategy to use in this situation ? I’m located in Connecticut and really want to make a good impression.

All opinions and recommendations Are appreciated in advance thank you !

Allan Smith · Answer

Hard money is 12 - 15% interest. I pay some private lenders 6 - 10%.

My equity partners on a 4-build development deal will make out with about 25%. When bringing equity partners on flips and developments, I shoot to give them enough equity that they are projected to make 25 - 30% on their money.

There's a developer buddy of mine here in Nashville and he gives his partners 50% for making the down payment and they make about 40% on their money.

Your $30k  friend would probably do fine with 10 - 12%.

Joshua Janus · Answer

10% does seem a little high right now. Have you checked websites with private money? Make sure to set up a great proposal for your deal that way they know your serious and can execute.

Brad Derry · Answer

@Joshua Janus what would you consider high ? Is 10% good or is that too high. That’s what I’m trying to figure out so I can find the right brrr deal. My fear is the investor might expect to much and I rather set the expectations so I can find the right deal that leaves everyone happy.

Joshua Janus · Answer

You are going to get the best return on the investment by structuring the deal where the hard money is simply a bank, and they have no interest in the property. Even if the interest rate is somewhat high for the money, it can still be worth executing if you found a really good BRRRR for an example.

Jay Hinrichs · Answer

gotcha..  people do rates of returns at an interest rate and some do equity splits its what you can negotiate given the risk profile of the investor

Brad Derry · Answer

@Jay Hinrichs maybe I worded myself wrong but, I already have a muti family unit that I got with only around $9,000. There’s also people getting into real estate with lil to no money. So even if I use this money as a down payment or most likely what I will do is use the money for my rehab. I was just wondering what’s good rates people are using when receiving private or hard money loans.

When using hard money loans what’s the avg ROI for the investor

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