Advice on terms for hard money lenders who are family

[Joe Gravelle]

Maybe this question shouldn't be asked because they may be no difference in terms or options when dealing with family as hard money lenders, but just in case it is worth a shot:

When your private money-hard money lenders are family members, what terms do you offer them? Do you give them the same rate/return/terms that you would non-family investors?

I understand that professional level hard money lenders would most likely be more demanding and/or more discerning, but if all being the same, would you offer( or have you offered) different terms to family that you didn't or couldn't offer other hard money lenders?

Thanks in advance.

-Joe

[Dell Schlabach]

Its always good to ask people what they want, if its reasonable then work with that.

People who have money in savings accounts or CDs may think 8% is an exceptional return. While other family members who know what hard money lenders charge may think 12% is low. 

We pay 6-10% for our private money, so I would not pay any relatives more than that. If your hard money is costing you 15-20% and your relative is willing to lend at 10% there is no need to offer more. 

Most important thing is find out what they want, if they want you to propose a rate, ask them if they consider 7%  good deal? You might be surprised at the answer, you can always go up a few points, its hard to get them down after you have proposed a much higher amount then you needed to.