Private Lending: Fees are a bug-a-bear!

[Jamie Parker]

This is not intended to be a rant of the complaining sorts. However, from the this post I hope that someone may gain some value out of my situation. 

Short story long....

In the process of completing the process to get funded from a private lender. To be honest, it's not that the it sounds too good to be true, it's more of the; lets see how this process works variety. Because my real estate journey started from wholesaling, can't say that going in to this situation i was fully aware of the fees associated with getting funded. Origination sure. Points yea. I/O hard money with up to 12 months or 18 months terms definitely. Different products required different fees to fund the borrower. As wells as these requirements may vary by lender's state requirement and lender's source fund type, not quite sure of the vernacular, but i think you get the I deal if you have read this far.

In the private lending world, funding can be originated from various places. Not to get to far into the weeds about "where the money comes from", to name a few, Capital funds where investors (accredited and/or non accredited) fund a bucket for investment purposes. First thing comes to mind for me are Private Placement Memorandums, 506 b and/or 506 c. Whatever you organizational structure is S-Corp -C corp, LLC, GP, or LP, the fees for lending can look different.

I have had the pleasure of finding a lending source backed by Insurance policies. Either im in left field or I have stumbled into "big league" territory. Either way walking into the area I the selling point appeared the same however, going thru the process myself sounds a lot different. 

Mind you I have only heard about the Hard money, and private money fees schedules at real estate meetups (REIA/REIN) and speaking with various lenders in the last year in my town.

5 point origination 

I/O 1 point,

up to 12 month terms. 6/6

after the first 6 months payment goes to 2 points. 

With this different product, again not complaining, fees are different totally also not a real estate loan w/o collateral. 

1 point origination 

1.5 point insurance bond (protect against personal injury/loss of life)

9 point non collateral document. 

my loan is I/O over 100 months. (there is a non interest only option as well. I made the choice for Interest only)

no prepayment penalty.

Im must say I was very excited to get things moving forward on this loan. Oh 1 pt origination, that's doable. then 1.5 insurance bond, thats gonna takes some work. But today when the non collateral fee was announced, my excitement became frustration quickly. Why didn't you..... I immediately had to take a sec and realize, "bro this your first go at it." Wholesaling only and buying property are totally different frames of reference. Also buying a "bando" with high hopes for a majestic "rise of the phoenix"rehab project, not impossible. But the phoenix literally burned to ashes. So when it gets gritty, when the rubber meets the road. That's a brand new tire you got about 20-30 thousand miles to go on them bad boys. 

I hope there is someone can get something for this post or share your thoughts.