Private Investor Question for Real Estate…?
I have a business where I buy real estate, rehab and flip and/or rent. My partner and I are doing great but we are looking for private investors to bypass banks. The main question I have is this: What type of return do you pay to the investor? Is it a percentage of the total loaned, monthly payments from rent…? We simply dont know. So, If I bowrrow k from an investor, do I pay him back (as an example only) k? Do I give him monthly payments? Is their a time frame?
Thank you VERY much in advance. I live in Illinois and we are trying to figure out the most amicable way to repay the investor.
Thanks!!
All,
Excellent responces and I thank you. I have another question: How do you find private investors?
Like this post? Subscribe to my RSS feed and get loads more!
3 comments
Craig and Don on June 17, 2009 at 9:56 pm
Congratulations on taking action. I have used over 2 million dollars of private money in my real estate investing business in the past 6 years.
The going rate is 10-12%. I do 10% if they require interest only payments and 12% if they will allow one payment at the end of the 6 month balloon note which would be the principle and the interest that has accumulated. THe interest is simple interest.
It will be in your best interest to pay the investor back in a manner that makes them feel comfortable and meets their needs. Once you do one loan with them and they get their money back, they will be asking you where your next deal is.
Another thing I do is I guarantee the investor 2 months interest. THe reason for this is that the investor is most likely taking the money out of another investment and lets say another cash investor comes to me the day after I buy the house and offers me 20K more than I just paid and I sell it to them, they lender would get their money back after only a few weeks of interest and not have a good place to put it right away. In six years I have only had to do it once but it was well worth it and besides I know I got many more private investors as a result because i solved one of their fears.
For more information go to http://www.freerealestateinvestingsystem.com
Good luck
dog ma on June 17, 2009 at 9:56 pm
Hi Paul -
When I did the same thing with private investors, they set the terms. If I remember right, it was fairly high interest – 14 to 16%. They also charged up front fees to set the loan up as sometimes the funds came from several investors. In a fix and flip situation, the investor would also require a certain guaranteed return, since often we did not hold the loan long enough for them to earn much interest! Since yours is a private situation, you can work any deal that is acceptable to both parties. Most will expect monthly payments, but some may simply accept a flat sum when the property sells. If I were investing in this market, I would want monthly payments, since there is no guarantee as to when the property will sell. Glad to hear you are doing well!
tye_5mc on June 17, 2009 at 9:56 pm
Great question, we do what you are doing and what we are doing is paying 10-12% based on investing with us up to 3 years paid quarterly which is basically for the people who are strictly looking for a place to park their money besides the stock market.
However many people fall in love with the money being made on the deal and what a return plus a piece of the action so for people willing to invest $25k + we agree to pay an annual return plus a portion of the equity up to 20% of the deal depending on the size of the deal and how much their cash investment represents of the total deal.