Housing prices are sky high, esp here in CA. I have a Roth account I need to get out of CD's. I am considering lending on a house in San Antonio at 6.6 percent (first position performing). I would be lending 60 percent of house value, 2 year interest guarantee, 20 year loan.

I think this would be an ok return for a seemingly safe passive investment? Thoughts?

6.6% is cheap.

Hard money lenders in my area want a minimum of 8% plus 3-5 points up front on 90 - 180 day loans with 70% or lower LTV. Others take a flat 1% per month.

What are the local rates like in your area?

Rate seems low and 20 years too long. Make it a balloon payment in 3 years so you can renegotiate the interest rate. Also, how do you know the house value? Is the area appreciating or depreciating? I've seen lots of crazy things passed off as a valuation on properties over the years.

I have a house under contract that will have to wait for renovation until the one currently being renovated is sold. (my pockets aren't quite that deep, yet)

Re-reading your post, it seems you are looking for steady payments over a long time.

Considering bank mortgages are around 3% or less, you must be considering lending to an otherwise unqualified buyer. Who else would consider a rate that high, long-term? Somebody who doesn't manage money well? Could be risky.

This would be ideal for a developer

Thanks for your thoughts. I am lending to someone with a self directed 401 k who needs a non recourse loan. That is why the higher rate. And they can refinance out in 2 years if they want.

So yes, looking for a decent return for these days. UK

A lot of people in CA are buying out of state but that seems crazy to me

Ray-N-PA, NE, are you talking about loans for flips?

How much are you borrowing for these deals?

Ok so this is an investment property in am IRA which is correct. Non-recourse.

How confident are you on the 60% LTV.? Are you trusting someone’s appraisal or your own due diligence?

Are you willing to own the property for what you lent and would you want the property? If not be careful

If they can refi you out in two years then make it a 30-36 month balloon? Only give the, what they ask for/need Locking in at 20yrs is not smart at 6.6%

Going hard money is 12-15% with 2-5 points. I usually charge 3pts 13% interest. Why 6.6%? How did the negotiation go?

Sadly the local little league is looking to sell off a 37 acre ball field and recreation area. So I don't see this so much as a flip as a development opportunity.

Developing this location makes sense as more money pours out of cities, these folks are looking for space in a more affordable location. I know that is what pulled out of SoCal after I retired from the service.

If you are offering 6.6% for non-recourse, I think you are cheating yourself.

6.6% might seem high when home mortgages are at 2.5%, but how will you feel a few years down the road when inflation kicks in?

IF you decide to lend, make sure you vet the borrower, get a deed in lieu, do your due diligence to make sure the numbers are accurate, and charge an origination fee for your hard work. Agree with the others that 6.6% is way too low for a 20-year loan. You expose yourself to all kinds of interest rate risk.