Fair return on friends money

[Dan Favor]

fred, dont pay an upfront fee!! when i first started, i wanted that hard money loan bad too. i found a broker who promised me the world with a 'due diligence' fee of 1,000. when i told him no way, he emailed me for 2 days berating me about how i wasn't a serious investor if i couldn't come up with the money. why do you think he was so upset?? it's bc he wanted that quick 1,000 and didn't really care if i ever got a loan or not. again, dont pay an upfront fee. and at most banks, the upfront fees are paid at the closing table, not before. talk to hard money lenders on this board, and you should find someone if you hvae a deal. good luck.

dan, start your own thread.

[Karl V.]

From your question, it sounds like you have done flips before, so you probably have a going rate for private investors. Your dilemma is if you should pay your friend more than you would anyone else. Is that correct?

If so, then you also need to be clear on another thing: If you're paying 8% or more, then investing with your flips is a good investment, period. Friend or not, you are always giving your investors good return. So don't feel like you need to boost the rate for a friend.

If this friend is looking to invest with you for years to come, you'd better give him the same rate as everyone else. The worst thing you could do is give him a high rate the first deal, then cut it on the next deal. That leads to hurt feelings and ends friendships.

Hope this helps.

Karl