All Forum Posts by: Stephanie Castro

Thanks everyone for the replies! It's amazing to get the different perspectives from others with experience. I really appreciate you sharing your time and input. 

The contract spells out that the amount to be repaid is $23,000, so there will be no doubts about how to calculate the interest. There are provisions that this amount must be repaid within 60 days (doesn't matter whether she actually sells the property or not, that is not a condition of repayment in the agreement). And there are also provisions for what to do if she requires an extension (additional interest applies, details are spelled out in contract). 

@jeff s Thanks for the info regarding the business purposes only - I added something to that effect to the agreement and will have the lawyer review. We will also look into what you mentioned about initiating the lien immediately, perhaps my brother in law knows about doing that, but it was news to me, so thanks! 

We did a title search and lien search on the collateral property and it looked good. I actually learned the value of the house that's being used as collateral is closer to $125k (judging from purchase price and comps). It is mentioned in the documentation by address, and the clauses to do with transfer of title in the event of default were signed off on by the attorney. 

I'm just nervous because this is our first deal like this, but the replies here, in addition to legal advice we obtained, have really helped put my mind at ease. Thanks so much, all! If this works out well, I would definitely do more deals like this.

Hello! This is my first post on BP but I've been reading articles for a while now.

We are new to the REI world but my husband's brother owns a small rental property and has a team of brokers and a lawyer who he works with. Through his connections, he was introduced to a professional realtor by trade who specializes in short term house flips. Her usual lender was tapped out and she needed a small loan. We agreed to lend her $20,000 to be paid back after 60 days at 15% interest. She is putting a property she owns free and clear as collateral. The lawyer reviewed the paperwork and has blessed it.

As our first foray into real estate, this deal seems too good to be true. The only thing we have to do is transfer money to someone and 2 months later we will get it back, plus 15% interest, and if she doesn't pay, we get to put a lien on a house worth $75k. As a healthy skeptic, when something seems too good to be true, I assume it probably is.

So, question to the more experienced among you, and any other private lenders out there: What are the hazards of this approach? Any things we should be paying attention to that might have been overlooked? Does this sound like a "good deal"? Are there any red flags we should look for?

My husband doesn't know I am posting about this, and he trusts his brother, but I believe it's always a good idea to seek outside advice and I've found this community to be supportive and knowledgeable. Any feedback you can offer is much appreciated!!

Thank you!