Private Lenders ROI

[Abbigail Brown]

Hello,

How is a typical contract for private investment in a rehab project structured? I'm thinking mainly about the variable profit from a flip... Would you normally execute a contract for a flat 8-9% for private investment? This is for the rehab funds only, not investment in the purchase of the property.

Thank you!

Abbigail

[Jon Holdman]

Being for rehab only, is there another note on the house for the purchase? If the rehab lender is in second position, I'd want to see a much higher rate than 8-9%! In fact, I wouldn't do such a loan at all. Its just too risky.

How much of your own cash is involved? If you've bought the property for cash, there's much less risk. Or, if 20% of the deal is your cash.

How about using some other source of money? HELOC on your primary (I don't like this because a bad deal puts you house at risk.) 401k loan (locks you in to staying in job or paying it back quickly.) Credit cards. Sell a card. Something like that?