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 ...