Private money lender question

[Nicholas Ferraro]

Let me preface with the fact that I am very much stuck in analysis paralysis and have not done any deals yet. 

Let’s say I find a deal on a property I’d like to turn into an Airbnb, but this deal is going to require $50k to get set up. The net income would be $2500 per month. 

If I were to use a private money lender for the $50k, and paid it back with a 10% interest only payment for 5 years, would this mean that I have to rely on this property to build up $50k in my bank account in 5 years? 

After the 10% interest my net income would be around 2100 per month or about 25,000 a year. So this would mean that 2 years of income would be gone at the amortization after 5 years. Which I suppose is doable, just seems like a big deal to me.

But if someone can tell me if they’ve had experience doing deals this way I’d like to know how it worked out for you. 

[Brandon Vukelich]

Hey Nicholas, admitting your stuck in analysis paralysis is the first step to recovery. :)  But I hope that doesn't mean that you haven't even submitted an offer yet.  Making offers is a good step in curing "AP."  

Not really enough details here on the deal to help comment with specifics but if you only need $50k, I would suggest finding a partner vs private lender. I would believe that if you really put your feelers out there in your network (friends, family, co-workers, etc) that there may be at least one person interested in your deal and coming in with $50k for some equity. I get that many people don't want partners but it could help spread your risk on the first deal, improve the NOI without high financing costs and possibly bring some more knowledge/experience to your first deal.

Be prepared with operating an airbnb (STR), they can offer better returns but it comes with more management and bandwidth needs than LTRs. Think of it as the hospitality business rather than a rental. Guests have much higher expectations and require more attention than tenants in LTRs. Best wishes on your journey. BTW, I like that you have "investor" in your profile even though you haven't done a deal. That's the right mindset!