Is there a 'Appropriate Minimum Interest' to offer to PM Lenders?

[Daniel Dietz]

Hi,

A short background; I have purchased my first duplex within my SDIRA for all cash and have it rented. Could not get non-recourse lending due to an 'ineligible property class' that most of the other duplex or triplexes will also fall into. Too old, not expensive enough etc... I have what I would consider an exemplary business reputation of over 20 years in my town in the construction industry working on projects from 10K to 100K+. I also have a 'mentor' in the form of an employee/relative (who happens to work for me) that has 10+ years of experience with owning/managing about 10 units of his own with an excellent reputation both within our business community and as a Real Estate Investor/Landlord.

I have started to put together a list of potential private lenders after doing a lot of reading here. I have roughly 150 names, of which I am ready to do a 'test sample' with a couple of them that I am very comfortable with, and I think they with me also. My approach for this 'sample' is going to be "Here is what I have been investing in, what returns I expect, how I have been financing it etc..." and "this is how I see an opportunity for those interested becoming Private Lenders to participate and receive a pretty good return on their funds" (I am working on better wording for this).

I envision these potential investors falling into 2 groups primarily. Those individuals with a high nets worth who are not really interested in doing things like real estate investing themselves, but would like to diversify, and understand that it can be a great avenue but want to let someone else do the day to day of it. The others would be people a bit more like myself who have most of their assets tied up in either their own houses/farms or their retirement accounts. I envision them diversifying those IRAs etc...by putting their 'lower risk portion' (think usually CDs etc...) into Private Lender loans for anywhere from 3year to preferably 15+ years.

MY QUESTION; Is there a 'minimum' rate as a 'general rule of thumb'? Of course Im sure people see all kinds of scenarios out there. As a VERY rough idea what I am thinking is this; If 3 year CD rates are at 3%, offering to borrow at say 5%. If 15 year rates are at 4%, offering to borrow at 5.5 to 6%.

I know this probably seems low to some of you, but I know a couple of these people well enough to have an idea of how much they have invested in what kind of items.

Thoughts?

Thanks, Dan Dietz