[spex x]

[ QUOTE ]
[ QUOTE ]
I run an RE business. I've got good relationships with private investors to whom I sell notes, etc., and I GUARANTEE a 20% return to ALL my investors for every deal that I bring them. My investors have FULL RECOURSE to collect the money that they loan me - that means if the deal doesn't work out, i'm still on the hook for the cash.

My RE business generates anywhere from 20% all to way to 150% yields, and my average yields are right around 80%. If you can't make 20% in RE, then you would never choose RE as an investment strategy. Its too much.

The point is that 9.75% guaranteed is not out of the ordinary at all for many RE investors, and its not unheard of at all to personally guarantee the money. In fact, its quite common.

I'd say that if your brother doesn't understand the investment too well, then he should probably steer clear of this deal. The high interest rate seems so juicy, but there are a lot of ways to get screwed. His friend might have all the best intentions, but ultimately not know what he's doing. I guess I'd want more security on a 100k investment than, 'he seems like a trustworthy guy'. I'd want to know EXACTLY where the money is going, how its secured, who will be spending it and on what, the strategies for making money with the investment, who will be doing the work, the trust's track record, the experience of the managers, etc.

Clearly your man doesn't understand the investment. Stay away for now, learn more, and go back to the guy later. If he's as good as he says, he'll be around next year.

[/ QUOTE ]

How bad do they perceive your credit to be for you to need to pay 20% for a full recourse loan? People charge lower rates on prosper.com. You can get better rates on an unsecured basis from a lot of banks. College students with no jobs, no credit history beyond student loans they haven't started paying back can get credit cards with similar rates. If your returns are as high as you say they are, you should've been able to accumulate enough equity to significantly lower your cost of capital through normal channels.

[/ QUOTE ]

Sure, you WOULD be correct, except that institutional lenders tend to shy from the type of RE deals that I like to do - mobile homes, mobile home parks, manufactured homes on land, and new development, and that type of thing. Thats not all I do, but right now its most of what I do.

Unfortunately Prosper.com loans are 1) limited to $25k max, and 2) you can only have one at a time. I sometimes do use credit cards to fund deals b/c I get low interest rates and I've got a lot of credit. The problem is that it hurts my credit to access those lines, so I don't like to touch them unless I have to.

You're right - I COULD get less expensive money. But it would be a lot of work, would slow down a lot of deals, etc. If I need $50k for a deal, I like to just make a call and have the money that day. I pay more for that convenience, but I rarely lose a great deal. To me, its worth it. Its not for everyone.