Since we have been working with partners, our experience tells us that there are three things that we know are important for our private lender partners:
1. They’re looking for a smooth and simple transaction. They’re looking for something uncomplicated
that they can understand. Be able to easily and clearly explain the purpose of the loan.
2. They want to make sure that the principal — the amount of money that they are loaning — is
always adequately protected. This is probably the most important concern that they have. They
want to make sure that, if they loan out $200,000, they will get at least $200,000 back. They have
to do a lot of deals to recoup losses at that level of lending.
3. They want to know their rate of return. This is not necessarily the interest rate. The rate of return is
also going to be a function of both points and time. Just because we maybe offering to pay 7% to a
private lender partner doesn’t mean that they will be getting a 7%% rate of return on their investment. They
will look at the overall return after legal fees, title work and lost opportunity. Also rate of return can
be enhanced by turning over their money on multiple deals a year, so they could earn more than
7% or whatever rate we are offering.