12% Vs 14% Private Money - Flipper Funding Explained
Very frequently people are searching for private funds to flip properties but focus on the wrong aspects of the money. With short term money, there is very little difference to the borrower between a couple of points. When looking for private money to fund your flips, your primary concern with the lender should be 'how easy is it to work with lender, how fast will they close and will they close every time'. Take the example of a $100,000 loan size at 12% interest. That means it will cost you 1% per month for a 12 month note. That amount is $1,000 per month. If it is a 14% interest loan you are paying roughly $1,167 per month. The difference is $167 per month which is very small on a flip project. More importantly the borrower should ask how fast they get their draws for construction. The reason being, if the draws are delayed 2-3 weeks at a time on 12% money and there are 3 draws, you could be holding the project for an extra 2-3 months. If the 14% money company gives out draws say within 72 hours of ordering, you could be out of the project 2-3 months ahead of the 12% money and the 14% is actually cheaper for you because the lender was faster and more efficient. When searching for private funds, don't get hung up on the pricing. Focus your attention on the quality of the lender and how easy they make it to do business with them.
Ian Walsh
215.839.3271
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