"Good" interest rate - definition, explanation and tips

At the request of the management, raises a self-employed post:
What is a "good" interest rate?
Interest is a function of chance, versus risk, versus alternative use.
I have $ 1. What can I do to make a profit?
I can put it in a savings account. This will give me an interest rate of between 0.5% and 1.5% without risk.
I can put it in a Certificate of Deposit (CD) for one to 5 years - it will give me a return of up to 4% - again, without risk.
I can invest in stocks, bonds, or mutual funds - here I start taking risks, but the return can reach up to 14% or more on a long-term average. In the short term, I can invest relatively solidly in the S&P 500 and get about 7%.

Now an Israeli investor comes, and offers me instead, to lend * her * my dollar, for some interest, and risk that her investment will fail, that she will stop paying me, I will have to seize the property, and get stuck with it until I can sell it - hoping I get at least the dollar Mine back - maybe with some space.

I know that if she could, she would take a conventional mortgage from a mortgage bank, with an interest of 5% -6% for 30 years. But she probably can not. Maybe this property of 5 + units? Maybe it's a commercial property? Maybe she does not yet have a credit rating, and all the bureaucracy just does not fit her?

Now she's coming to me…

What can lower the risk for me, so that I will give it a lower interest rate?

Loans can range from 6 months to 30 years. Short-term loans of 6 months to 9 years are considered bridging or hard money loans - usually will be in the range of 15% -2% interest, with 5-XNUMX points. They are particularly suitable for flips, deals that need to be closed quickly (before foreclosure for example), and properties that require a serious upgrade.
Longer term loans can fall from 5% to 9% today, and are suitable for long-term rental assets.

You can try to get a lower interest rate if you agree:
* Pay off points in advance
* Shorten the life of the loan and repay the "balloon" in 3, 5, or 10 years (or refinance the loan on terms that will be available then)
* Make payments of principal and interest, instead of interest only
* Taking a loan at a percentage lower than the value
* Add investors with more experience and possibly with a better credit rating
* Make the lender an investor and give him Equity
* Pledge another property under the same loan
* and so'

If you get an offer at a certain interest rate, you need to calculate the cash flow, and the other risks involved (can we get a new loan at the end of the period? What if the interest rates go up by then?) - if the numbers do not work, you can try to change parameters and find another loan Is to find another property, where the numbers will work.

** I am a licensed Residential Lending Agent for 1-4 residential units, and also a commercial loan broker for other types of properties, and I have lenders and business partners who can offer creative solutions in most US states - I would love to answer more questions on the subject!

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