What percentage is fair when cash??

[Shiprec]

Looking to buy a lake front vacation property in northern Vermont. If I was to borrow the 140,000 in cash from a friend and agree to pay all back in a year. What amount or percentage should I offer him in cash, besides the 140,000, for his help to make this a beneficial investment for him? Thanks for any and all help

PEACE
Chris

[wayne1218]

If you can pay that back in a year, you must have the means to buy it without him? Either that or save and buy a property in a year with no % returned to anyone.

[Shiprec]

No, i do not have the means to pay cash for it. I live in NY and make a good living. Issue is banks in my area do not like to give loans for out of state properties. I would pay my friend 750-1500 a month cash then in 10 months get a home equity loan to pay off the 140,000. I do have a mortgage and car payment but no toys, boats, atvs, motor homes so could afford that range. I could wait and in a couple years pay 75% cash but worried once property goes on the market, it will be scooped up. A inside info home, A friends aunts. The ones you wish you knew about before hand.

[wayne1218]

I would say you have to give at least 5%-10% interest for a cash loan.

[The Lovedoc]

I'm sorry, if i was your friend, I would not be doing that…. Been burned by "friends" many times… But, kuddos to you!

[joshuab1]

I'm sorry, if i was your friend, I would not be doing that…. Been burned by "friends" many times… But, kuddos to you!

Hard loans are usually between 17-25%..if its a friend, I dont know...7-10%

[robby_morini]

Looking to buy a lake front vacation property in northern Vermont. If I was to borrow the 140,000 in cash from a friend and agree to pay all back in a year. What amount or percentage should I offer him in cash, besides the 140,000, for his help to make this a beneficial investment for him? Thanks for any and all help

PEACE
Chris

Ship,
Is it a vacation rental or is it just for your use. Either way, find out if there are monthly dues or association fees. There will also be insurance and local property taxes to consider, they come due every year.

If you know all about these things you should be fine. 4% is a fair rate, your friend can't get that rate in any bank or safe investment. Also, summer is never a good time to buy a vacation home, you are buying high. Don't know the market up there but you may get a much better price in January.

Either way, good luck, hopefully you have done your home work

[gizmo]

How is he getting the money if its something he has in 401K and borrowing against it than he isnt losing anything if he is putting it back in so 5% is good. If he is taking out of bank and losing interest than find out what the interest rate is at his bank and give him a few % higher. You need to have him write a note for you and get a witness and write the terms of payment so if something happens he can try and get it back. Hopefully because your friends it all works out.

[Shiprec]

THANK YOU to everyone with your advice. All good advice!! All home work done and have gotten the property down to 140 from 196. It is on Lake Champlain and has extra empty lot. I have a few friends I could get the money from (scratching my friend Lovedoc off the list now though) lol. Just want to give them a "fair" return.

ps Lovedoc, if you were my "friend" you would have no problem loaning me anything. :o)

[Shiprec]

My plan is to purchase the house, pay 1000 cash a month to them and in 12 months pay off the entire 140 borrowed. Would get a legal promissory note saying the 140 would be paid back in full in twelve months or home transfers to them. I would also pay fees for a lien if they requested that also. "Fair"?
(what is fair).......

[BettorsChat]

My plan is to purchase the house, pay 1000 cash a month to them and in 12 months pay off the entire 140 borrowed. Would get a legal promissory note saying the 140 would be paid back in full in twelve months or home transfers to them. I would also pay fees for a lien if they requested that also. "Fair"?
(what is fair).......

So their getting $12k return on a $140k loan? That's about 9% which is more than fair. With rates being around 4.00% I would say 5%-7% return is a decent return. Unless they have a guaranteed interest that pays more than the 5-7%.