Private Lending and the BRRRR Strategy

[Chris Troutner]

Hi BP Members,

I finally have my first off-market deal (a planned BRRRR) and it happens to come right after I have invested in a my first flip! So, I'm looking to use private money to fund the BRRRR. I have people in my network that are interested in investing with me, but I'm wondering what are typically the mechanics of private loan for a BRRRR? Let's say I'm offering 8% for 12 months and I will make monthly payments for the lender to fund the purchase and rehab costs. And then 6 months later I refi out and pay them their principal. I'm assuming I treat it as a HML and they get the 8% for as long as the loan is outstanding - in this case 6 months. I know there could be variations, points, etc. but am I missing something?

[Christian Wathne]

You're spot on. Make sure to include that there is no pre payment penalty (early payoff) in your private money loan contract.