To any of you who use private financing for your deals, how much do you pay your lenders?
To pay a lender depends if you have no choice. Money in hand is better than none.
I was thinking more along the lines of how much interest you pay them, etc.
I was thinking of doing a 2-3% compound monthly rate.
That sound obscene. Why would you pay them more than most HMLs? That comes out to 24 - 36% anually.
Yeah, I know that figures out to a very high annual rate, but I’m only going to hold the properties for 2-3 months. Plus, I live in one of the cheapest RE markets in the country. Most properties I’d be buying would be in the $40k-60k range for middle class areas. So, 2-3% a month doesn’t come out to a whole lot of actual cash in the end.
I was just wondering what others did. Maybe I’ll reconsider what I plan on paying, but I want the return to be appealing enough to attract possible lenders.
I broker private money deals for a few high net worth investors and they charge 4 points and 15% interest only for 6 month. There is a woman locally offering to pay 9% and 2 points for money but no lenders are biting.
So, if I can get private financing with a 2% compound monthly rate with no points then I’m getting a pretty reasonable deal huh?
So on a $60k loan amount you’re paying $1200/mo? At 15% simple interest only it’s $750/mo plus 2400 (4 pts).
On a 6 month note yours comes to $7200 mine comes to $6900. Of course the longer you hold it the less attractive yours becomes.