Structuring Private Money Deals

[Evan Ventura]

Was wondering if anyone can offer advice on structuring private money loans. I am new in REI and am currently seeking out my first deal. When that first deal finally does present itself, I want to be ready and move on it with confidence.

I currently have two eager private money lenders on board, one a relative of my business partners, the other a contact I had made at a previous job. While these lenders are motivated to get deals underway, we have only spoke in generalities; no hard numbers. I would like to structure deals in a manner that is sustainable and highly beneficial to all parties, and would like these relationships to be long term and attract other lenders from their circles. 

With that being said, I have read of investors paying anywhere from 6-12% interest, points or no points (though more so with hard money than private). I will be conducting all of my business in New Jersey with the goal of flipping homes to supplement paying down a large rental portfolio. I plan on finding these properties predominantly through wholesalers and auctions, and perhaps the MLS if one ever slips through. Here are my questions:

1. What do you believe is a fair interest rate? 

2. Points or no points? If so, how many?

3. Is it wise to wrap as much or as little into the loan as possible (down payment, principal, rehab, misc)?

4. What is a fair flip time frame?

5. What is a fair buy and hold time frame?

6. If seasoning a rental until refinance, do you begin paying down the lenders interest using cashflow or do you wait and pay the full balance upon refi?

Additionally, if there is any other information I have not asked you feel is important for me to consider, please advise!

[Evan Ventura]

@Don Konipol Thank you for your feedback and playing devils advocate. Despite my "ego" which may at times cloud my "thinking rationally" it is appreciated. I have a few questions for you:

What questions should I be asking? Should I ask any questions at all? Should I kick rocks? While my questions may seem a bit elementary to someone with such breadth of experience, I believe them to be realistic and somewhat more specific than, "hey everyone how do I get rich and have a show on HGTV?" The fact that all of my few posts solely ask questions should be my admittance that I am indeed not an expert, and far, far from it.

Points 1 - 5 are entirely true statements. I have nothing. I am starting from 0. Forgive me, but perhaps after 15 years and 500 deals you have forgotten what led up to deal 1? Surely, education is huge (what I am trying to capture on this forum and beyond) but do you believe there is a point at which you just need to dive in and do it? If my first dozen deals broke even, or even lost a little money (full time job could mitigate this), I would be thrilled because I would have learned a wealth of knowledge from those experiences. If they were a total bust, well, thats the risk we take. Surely if it were as easy and romantic as the shows make it out to be everyone would be a rich beautiful real estate investor! Applying the same mentality, I have been fairly successful in my industry, and would like to see if I can accomplish the same in real estate. I am genuinely interested in learning what brought you to where you are today, surely you can relate in some capacity.

Lastly, I must ask, what "program" of mine were you analyzing? I do not believe I shared any specific strategies, just a basic "I am going to do deals with private money." I think this general concept is fairly accepted, though surely I could share deal-specific strategies with you for feedback if you had the time of day for such a peon. If what I understand is true, you are saying as an experienced investor cross-checking (an imaginary deal I proposed somewhere on the forum?) you find me unfit to invest in. Don't worry, I wasn't going to ask you to finance any of my deals anyway. Inherently, those who are taking the leap of faith to invest in me accept this risk but justify it against my character.

I hope I did not come off brash either, and appreciate any advice you could offer further.