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Private Money: Debt Partners

Debt partners (also known as private money or hard-money lenders) don’t care about an equity position in your deal. All they want is a stable rate of return. And since the property you want to buy is distressed, don’t expect to get a sweetheart interest rate from a private money lender. If you find a mom-and-pop lender, they’ll probably want 8%–10% simple interest. The larger, more institutionalized lenders want 12%–18%.

Here’s what else they’ll likely require:

  • A down payment of 20%–30% (or more)
  • Monthly interest payments
  • A loan origination fee
  • Points (1–4) based on the loan size
  • A personal guarantee

These lenders ...

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