Lending money for interest paid

[Anita Ahuja]

Hi fellow BPers. I’m in search of some advice: I agreed to lend 50k to a fellow investor/flipper in exchange for 10% interest, min of 3 mo, max 6 mo. I have a lien on one of their properties (worth 175k) until I get paid. I agreed but now I’m nervous and want to back out. Please advise. Is this a regular practice. I don’t know these investors well enough yet to blindly trust. Having a lawyer review the docs will cost more than the interest earned. Thank you in advance!

[Jon Holdman]

This is a pretty common practice.  Are you in first position or second?  I'd never do a second position loan.  Certainly not for a low rate like 10%.  If the loan is already done you cannot easily back out at this point.  You'll just have to wait it out.  If the docs were provided by the borrower, and you're not familiar with them then you definitely want an attorney to have a look at them.  You're earning at least $1250 in interest and an attorney should only be a few hundred dollars.