Private Lenders for Rental Properties

[Edgar Mendoza]

Hi BP,

I need some advice, my realtor just found a off-market duplex with a great purchase price and cash flow (per BP calculator). With my other properties, I went the traditional way by getting a loan at a bank and putting a down payment of 20-25% for the property. BUT, I am currently cash dry and I do not want to lose this opportunity. I found a private lender that is willing to put down 90% of the purchase price with 10% interest rate for 12 months (no prepayment penalty). Is it wise to use a private lender to purchase rental properties?

Thanks for your help!

[Taylor L.]

What's your plan after that 12 months is up? How do you replace the money lent to you? What does the 10% rate do to your return?

Private lending is a tool. Wisdom is more related to how you're using the tool, rather than the tool itself.