What's the going rate for a flip loan?

[John Gillick]

A good acquaintance wants to borrow money for a flip.

He is very experienced.  He does not need my money in that he has other options.  But if I want to invest money providing better terms than those options, he's happy to take the better terms.

I don't want to ask for the terms of his best alternative, and even if I did, I'd likely still post this to verify.*

If anyone was willing to quote me a ballpark for the below situation, I'd greatly appreciate it.

After Repair Value: $165,000 

Purchase Price - $90,000 

Renovation Budget - $35,000

Loan: $125,000 (75% LTARV)

Zip: 17103

*If anyone feels compelled to ask, "if you don't trust him, why lend him money?"  My answer is, right or wrong, I put lying about "other offers" as just fair game negotiations that don't really reflect on a person's honesty.  

[AJ Exner]

Quote from @John Gillick:

A good acquaintance wants to borrow money for a flip.

He is very experienced.  He does not need my money in that he has other options.  But if I want to invest money providing better terms than those options, he's happy to take the better terms.

I don't want to ask for the terms of his best alternative, and even if I did, I'd likely still post this to verify.*

If anyone was willing to quote me a ballpark for the below situation, I'd greatly appreciate it.

After Repair Value: $165,000 

Purchase Price - $90,000 

Renovation Budget - $35,000

Loan: $125,000 (75% LTARV)

Zip: 17103

*If anyone feels compelled to ask, "if you don't trust him, why lend him money?"  My answer is, right or wrong, I put lying about "other offers" as just fair game negotiations that don't really reflect on a person's honesty.  

Hey John,

No issues with seeing where things are at. Someone with some good experience, I would anticipate 10-12% interest only for 6-12 months with varying degrees of lending to ARV. So like the example you gave, there are fewer lenders doing 75% ARV, but many more lending down to 70%, so at that amount there might be more options.

I hope that helps, would be happy to jump into more specifics with some more details about the flip itself.

[John Gillick]

Thank you.  No fees?

[Jacob Sherman]

something like this would probably run about 12%-13% with 3-4 points for an extremely experienced borrower . Are you taking down payment on the purchase or funding the whole purchase and construction ? 

[John Gillick]

Quote from @Jacob Sherman:

something like this would probably run about 12%-13% with 3-4 points for an extremely experienced borrower . Are you taking down payment on the purchase or funding the whole purchase and construction ? 

 Thank for the input.  I'm providing 125k, so based on the other numbers I guess that's whole purchase and construction.

[Jacob Sherman]

Quote from @John Gillick:

Quote from @Jacob Sherman:

something like this would probably run about 12%-13% with 3-4 points for an extremely experienced borrower . Are you taking down payment on the purchase or funding the whole purchase and construction ? 

 Thank for the input.  I'm providing 125k, so based on the other numbers I guess that's whole purchase and construction.

 Probably would be closer to 15% and 4 points if funding the whole purchase and construction . Borrower has no skin in the game because fully financed so higher risk for lender 

[Sophia Buesing]

Our rates are 10.5-13% 1.5-2 points. Hope that is helpful. 

[Stewart VanValkenburg]

I usually see 10-15% down 1-2 points and 11-12% rates. 

[Stuart Udis]

This doesn't pencil. You are focused on loan terms but the collateral should be your first priority.   THe $125,000 costs does not include any settlement or carrying costs and expect the borrower to pay around 7% on the exit in form of settlement and brokerage transaction fees.  Maybe it can work as a rental but certainly not as a flip. Also, in these lower price points, contingent items will have a greater impact on the margins.  As far as the pricing for debt, banks will typically charge 1% as the originaiton, doc prep and construction debt is generally priced at WSJ +.5-1 point. Alternative lenders will be a few points higher on the origination and interest rate. However, I would strongly suggest you do not extend $125,000 here. A bank would maybe finance 75% of the borrowers cost, this would put the loan closer to $90,0000.00.

[Erik Estrada]

Quote from @John Gillick:

A good acquaintance wants to borrow money for a flip.

He is very experienced.  He does not need my money in that he has other options.  But if I want to invest money providing better terms than those options, he's happy to take the better terms.

I don't want to ask for the terms of his best alternative, and even if I did, I'd likely still post this to verify.*

If anyone was willing to quote me a ballpark for the below situation, I'd greatly appreciate it.

After Repair Value: $165,000 

Purchase Price - $90,000 

Renovation Budget - $35,000

Loan: $125,000 (75% LTARV)

Zip: 17103

*If anyone feels compelled to ask, "if you don't trust him, why lend him money?"  My answer is, right or wrong, I put lying about "other offers" as just fair game negotiations that don't really reflect on a person's honesty.  

 10.5-13% 

Points will depend on the rate. But typically 1 point to 4 points. 

[James Blair]

Totally reasonable to ask for his best terms. You want to offer something that works for him but more importantly works for you. Since this is the first deal that you are doing with him, I would not offer 100% financing unless you are fully confident that sale price will exceed ARV. As someone else, had mentioned, the numbers on this are very tight.