Private Money ROI

[Account Closed]

Just curious out there, I have been going to my local REIA meetings for the past few months and trying to network there. Recently I struck up conversation with someone who works a lucrative full time job and is just interested in being a lender.

He told me a few days ago that when I find my first deal to call him, not the bank. So I am out scouring for my very first deal still. I have one I am going to look at this week.

Question is, I want to be fair to my newly found private money source and I want to give him a solid ROI, so he will be inclined to work with me in the future. In order to not be insulting, what is a good ROI to offer to him so that I'm not cutting huge into my profits but keeping him happy and willing to invest in the future? I don't want to just ask and seem stupid, rather I want to offer with confidence to further solidify his support.

Thanks!

[Ann Bellamy]

I find, in this environment of extremely low returns on CD's, etc, that there is a flood of people who have decided to be private lenders to real estate investors. They may or may not have any experience in real estate investing. Frequently they don't and that usually makes me uncomfortable because they don't understand all the things that can happen.

I'd do as Karen suggested, and just ask him his criteria and terms. Even if he has no experience, he probably has a number in mind.

If it appears he has never done this before, I'd make sure of one additional thing once the two of you have come to agreement on terms: Make sure he has an attorney to represent him. Although that sounds as if it is not in your best interest, consider what could happen if the deal goes bad and he decides to sue you.

For sure he would get an attorney at that point. Any good attorney would spin it that you, the predatory real estate investor, took advantage of him, the unsophisticated person just looking to invest in safe real estate.

So if he has an attorney, then you don't have to worry that he doesn't understand the risks and you know you've done the right thing.