Private Lending - Flat Rate vs Annualized?

[Griffin Fehrs]

Hey all,

For those using private money from personal relationships  - in this case - on rehab projects - what are your opinions on flat rate returns vs annualized?

10% flat rate on $100,000 is quite different than 10% annualized when project durations are 4-6 months.

I understand if the numbers work in either case then it's a good deal.

Im just curious as to what terms are being used more - flat vs annualized.

Thanks

[Ned Carey]

Usually it is an annualized return, ie: 12% interest is 1% per month the money is still out. This is by far the most common.  Hard money lenders usually use a combo. They charge "points" up front in addition to annualized interest. 

It comes down to whatever you can negotiate. My thought is with a private lender keep it simple. Don't get into complex structures which will be difficult to explain.