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Updated about 8 years ago,
Risk in private note leading for rehab
Dear experts, I would like to invest in a rehab for 10% APR for 6 months. The house purchase price is 85k, rehab cost I'd about 20k. The loan will be secured by a mortgage on the house in closing.
My questions for pros:
(1) how much a loan can I go to minimize risk? I am thinking of 80% ($78k) as a bank typically does, but the buyer then may not have enough money from his pocket to purchase and do the rehab so we can not do the deal.
(2) how should the lending note be structured so that in case the buyer goes bankrupt, i can still be protected?
Any advice is highly appreciated.
Regards.
Yan