Private Money Loan Terms example needed

[Chris Vasquez]

Hello BPers,

I would like the help of any of you who have either loaned private money or have borrowed private money.
My questions for the sake of this topic are very specific.

1)What terms were you giving/given on the loan?
ex. a)Points or no Points. If so, how many?
b)Points upfront? or back end?
c)What interest rate?
d)What amortization time frame do you use to determine payments. ie. 5,7,10,30years?
e)What is better? Using PML to purchase or I purchase with my cash and use PML as a new first mortgage to do repairs.
Or vise versa? PML to buy and use my cash for repairs.

Assuming the property meets all 70% rule criteria for fix and flip.
Using $100k as an example. Answer a,b,c, and d with numbers.
Letter e, I'd like your opinion.
I'm the type of person that needs to see the numbers. I can't seem to find examples of a loan. All I get are Guru websites.
Thank you in advance
Chris
P.s. If I am missing anything like fees, please let me know.

[Paul B.]

Are you talking about lower-cost private money that is based more on your relationship with a person or hard money that is based more on asset values?

For private money, I'd try to target a rate between 8% and 10% with up to one point, payable at closing, although obviously on the back end would be preferable. Usually this loan would be interest only for 6 to 12 months, depending on the situation.

For hard money, rates will vary greatly with the lender, your cash investment, your credit, etc. For the most part, though, I see most hard money lenders looking for about 5 points (always paid on the front end) and a 15% interest rate for six months.

I'd always use the borrowed money for the purchase and never for the repairs. What happens if you put all your cash into a deal and then the lender fails to deliver the renovation money? Now you are in something of a jam. Plus, if you're paying for the renovations with your own money, you're not going to be on a draw schedule, and you won't have to pay inspection fees.