How Much Interest Are You Really Being Charged? - RCN Capital

How Much Interest Are You Really Being Charged?

How Much Interest Are You Really Being Charged?

How Much Interest Are You Really Being Charged?

calculatorWhen choosing a private lender for your next real estate investment there are numerous factors to consider. Investors will often try to pick the lender offering the lowest interest rate as it seems like a simple way to save money over the course of the loan. However, what some investors fail to take into account is how that interest is charged on the loan. The majority of private lenders in the fix and flip investing space will charge interest on the full amount over the term of the loan. So although a borrower may not have access to rehab funds that are being held back until phases of a project are complete, they are still paying interest on it.

Consider the scenario of an investor obtaining a 12-month, $162k fix and flip loan at an annual rate of 9.99%. The borrower receives an initial advance of $102k and $60k in rehab funds that will be disbursed in three draws.

When choosing a private lender for your next real estate investment there are numerous factors to consider. Investors will often try to pick the lender offering the lowest interest rate as it seems like a simple way to save money over the course of the loan. However, what some investors fail to take into account is how that interest is charged on the loan. The majority of private lenders in the fix and flip investing space will charge interest on the full amount over the term of the loan. So although a borrower may not have access to rehab funds that are being held back until phases of a project are complete, they are still paying interest on it.

Consider the scenario of an investor obtaining a 12-month, $162k fix and flip loan at an annual rate of 9.99%. The borrower receives an initial advance of $102k and $60k in rehab funds that will be disbursed in three draws.

Month

Outstanding Loan BalanceInterest Charged by RCN CapitalInterest Charged by Competitor

1

$102,000$849.15

1,348.65

2

$122,000$1,015.65

1,348.65

5

$142,000$1,182.15

1,348.65

12

$162,000$1,348.65

1,348.65

Total Interest Paid on Loan

$14,685.30

16,183.80

In this case, working with a lender like RCN Capital saves approximately $1,500 or 10%, which would ultimately be added to the investor’s bottom line. In the world of real estate investing, where margin compression is occurring more and more frequently, it seems like a no brainer to choose the lender that will consistently increase your ROI.

Stop paying for the funds you aren’t using and choose RCN Capital for your next fix and flip investment.