Fixed 10% Interest Rates

 

The short answer is private individuals and banks.

 

We have established relationships with people that have shared their investment objectives with us.  These individuals have stated that they would like to make better than the 3-5% rates which they are currently getting.

We pay banks 7% interest to borrow money which is secured by real estate; however, dealing with banks has drawbacks.  Banks often cannot move fast enough (speed can make the difference in getting the best prices), sometimes the property is in too poor of condition for them to be willing to fund (we mostly look at property in poor condition), and the loan products available often do not provide enough capital to fund the purchase and the rehab (the cost to rehab may far exceed the cost to purchase).

So it makes sense for us to pay a 10% fixed interest rate for money from private individuals whereas the funds can be obtained faster, without property condition restrictions, and that will be enough to cover the purchase and rehab.

 

The individuals we work with often have a savings account, a line of credit, an IRA, or some other investment capital that is not satisfactorily earning a high enough rate of return safely.

Some of these individuals that earn 10% fixed rates from us like to be part of the renovation process while others do not.  Some folks enjoy the "WOW" factor that occurs from an ugly house transforming into a gorgeous eye-popping home.  This is likely why television programs that show these transformations have such a large audience.

Are there risks? Yes, there are risks.  However, we have built a relationship with the people we work with first.  They balance the risks associated with lending money secured by real estate versus the other investment opportunities available to them and their respective associated risks with the goal of having their money safely performing better than it is doing now.

 

*The text above has been provided for informational purposes only and is not a solicitation for an investment.  This information is only relative within the state of Ohio.