What is the going rate for capital partner?

[Mark Lovejoy]

I came across a great deal that’s bank owned and wants a cash deal. I have plenty of equity but not enough time to get it these days.(corona) My partner wants 20% after 6 months. I’ve never used private money before. Is that the going rate? I know hard money is at 10% in my area but how many fees are involved? Never used hard money either. Always went conventional. Which way would you go?

[Kyle J.]

@Mark Lovejoy Sure the 20% interest is high. But a HML would have to charge you points to make any money on a loan amount that low. Although it still likely wouldn't equal what you're paying in interest to your private lender. But does that really matter? If you're only paying it for 6 months and you can still do the deal and make the expected profit you need to make, I'd argue that it doesn't matter.

And I'm not sure what exactly you mean by "it would be a hand shake deal".  However, if you mean your private lender is just going to give you the money directly without it being secured by the property or well-documented, well that must be a pretty good friend of yours and the added risk he's taking on by doing that must be worth a few extra percentage points because that's a very risky way to make a loan.  

Plus I'm sure you want him to earn an interest rate he'll be happy with so he'll want to loan you money in the future.  Perhaps once he sees that he gets all his money back on this deal, and he becomes more comfortable with loaning to you, you can talk him into lowering his rate a little bit on future/subsequent deals.