Current Private Money Terms?

[Trent Rogers]

Good Morning BP! I've never used private money to purchase a property however I may have inadvertently found a pm lender. 

With institutional rates on the rise over the past year I'm curious what rates/terms most private lenders as asking for these days?

While I understand that we can set the terms however we'd like, my potential lender is a long time client and friend so I want to make sure what we agree to is fair for all involved. Thank you!

[Scott Trench]

This is nearly impossible to answer without more context and it depends on the use case.

I think a great way to understand terms here is to shop for private loans. If this is a flip, you should shop or hard money loans in your local market. If a buy and hold, you should learn about seller-financing and private mortgages to understand competitive terms. You should bring this understanding of the market to your friend. 

A couple of thought starters: 

- If a hard money loan, an example might be in the ballpark of 1-3 "points" on origination, 55-75% loan to ARV, with staged release of funds (some released on closing, additional funds released as the project demands the release of funds) plus 8-12% interest, paid monthly, with a balloon due upon refinance/exit (not to exceed 12 months).

- If a private mortgage, an example might be in the ballpark of a 25-year amortization schedule, 5-10 year balloon, (contingent on the property appraising for at least the current/purchase price), 6-9% interest, plus perhaps some "points" on origination. 

All of this is negotiable, it's impossible to state what "market" is for these types of loans because they aren't widely reported, and folks who do this all day long probably have experience with wildly different loan terms than the examples I used here. 

A first-time investor without strong credit, and the ability to likely would have