Lending Business Advice Needed

[rbjunior]

Hello everyone,

I have a 25K on my savings account earning only 3%/yr. i want to invest this money on any higher returns small business. Now, a friend came to me and we talked about this idea. he owns a house and he wants to sell his house by november but he needs to make some improvements before listing it to the market to gain more equity. He doesn't have funds and can't make loans so i offered him using my money but of course there's interests or cut involved after the house is sold.
Would this be a viable startup for my money to make money? we did not come up into agreement yet, how much do you think is the reasonable interest or cut should i offer him? what should i do to have security on my money? any suggestions and advice are greatly appreciated. Thank you!

[Gee]

You better have a lot of faith in your friend. What if he does the renovations and decides not to sell the house? Or the house does not sell at a timely manner?

I suggest you walk away from this. Nothing good can come from it and you will loose a friend in the process.

[UrbanPoet]

i always wondered this....
is there a way to lend money, charge interest, in a legally binding way to avoid people running away?

[deep]

i always wondered this....
is there a way to lend money, charge interest, in a legally binding way to avoid people running away?
Lend money with interest in a legally binding way? No way, even the banks haven't figured out that one yet. :|

Any properly written contract is legally binding. You can do it too! However, just because it's legally binding doesn't mean some people won't "run away" as you so eloquently put it.

If you think a piece of paper is the ONLY thing preventing someone from taking off with your money, then you better not be lending to that person. Unless of course you ENJOY spending time in court.

[UrbanPoet]

Lend money with interest in a legally binding way? No way, even the banks haven't figured out that one yet. :|

Any properly written contract is legally binding. You can do it too! However, just because it's legally binding doesn't mean some people won't "run away" as you so eloquently put it.

If you think a piece of paper is the ONLY thing preventing someone from taking off with your money, then you better not be lending to that person. Unless of course you ENJOY spending time in court.

then again..... The banks use credit ratings ...so if you run away with money an never pay it back, debt collectors will eventually go after you and your credit WILL be messed!1

[grant]

Lend money with interest in a legally binding way? No way, even the banks haven't figured out that one yet. :|

Any properly written contract is legally binding. You can do it too! However, just because it's legally binding doesn't mean some people won't "run away" as you so eloquently put it.
The banks HAVE figured it out, it's called a "mortgage" and it means you can claim property (typically real estate) if the debt is not paid off.

If you lend your friend money it will cost you about $500 through a lawyer to place a 2nd mortgage on his house. Then when he sells it, you are guaranteed to be paid out... if he doesn't sell it, you can foreclose (i.e., have the courts order it sold) so you get your money.

You can ask whatever rate you want: obviously more than 4% (because that's what a PCF savings account pays) and probably less than 12% (because your friend can get a 2nd mortgage for that much at any mortgage broker). I suggest 10%.

[deep]

The banks HAVE figured it out, it's called a "mortgage" and it means you can claim property (typically real estate) if the debt is not paid off.
Sorry, I assumed the sarcasm was evident.

[rbjunior]

Thank you guys for responding my thread. Thanks very much Grant for the information.

[grant]

np. BTW, i recommend you only do this because you want to help your friend, not to make money.

If making money by making mortgages is your goal, you should offer your money to a lending company. They have all the processes in place to give you the best return for the least risk and very little effort from you. For example, check out this place (http://www.covemortgage.com/thelatestdeals.html).