Private Money at the END of a deal

[Larry K.]

I have a 2 family, fully rented, and cash-flowing. Just refied and it appraised for 230k. The refi loan is for 170k. The HELOC on my primary residence with which I bought, renovated, and held still owes about 20k (I wanted the refi to take the HELOC out completely but did not quite make it).

I have some friends who are interested in investing with me (they have money but no time). So I am thinking of arranging with them a 20k loan on the property so I can pay off the HELOC. This would take them to the 83% LTV point.

I am looking at this like an alternative to a CD for them. Their money is not FDIC insured but it is securitized against the property. 5 year CD rates seem to be in the range of 1.5 to 1.75% right now.

What do you think would be a reasonable interest rate to give them for a 5-year term?