Giving money to a friend from our OD for 8 months to buy his owner occupier Home?

[Ivan McIntosh]

Them in my sentence above, referred to the 'friend'.

Oh yes, I get that, Anthony. It was more that I thought about the phrase "money well spent" but couldn't help thinking it wouldn't be well spent, that it would be a little bit of a disaster. I think if a friend of mine needed a couple hundred it wouldn't be a loan, just a gift. I just wouldn't want to put a friendship at risk over money.

[Anthonyacat]

True Anthony, I'd lend a hundred or two to most people I know. But it would be disheartening to have them just never mention the money again and not pay it back.

Them in my sentence above, referred to the 'friend'.

[Ivan McIntosh]

True Anthony, I'd lend a hundred or two to most people I know. But it would be disheartening to have them just never mention the money again and not pay it back.

[Anthonyacat]

I guess that depends how good a friend they are...from the OP it doesn't sound like they are that close. There are some people in my life that would just be given money to help buy a house no questions asked, eg children, as long as I think they're not over stretching themselves.

Anyone outside immediate family and really close lifelong friends? I just wouldn't lend, because over the years my clients have demonstrated again and again that it's a bad idea to lend to friends and family.

If you lend a friend $100, and never see them again, it was money well spent.

But $100k? A bit harder to justify.

[Ivan McIntosh]

Just putting it out there, what level of return and amount of security do people expect from their friends?

I guess that depends how good a friend they are...from the OP it doesn't sound like they are that close. There are some people in my life that would just be given money to help buy a house no questions asked, eg children, as long as I think they're not over stretching themselves.

Anyone outside immediate family and really close lifelong friends? I just wouldn't lend, because over the years my clients have demonstrated again and again that it's a bad idea to lend to friends and family.

[Wayne]

Just putting it out there, what level of return and amount of security do people expect from their friends?

Would depend on how much faith you have in your friend

[Learning]

I really think you shouldn't have a bar of this. It's a terrible return for the level of risk (which is very high). You won't be able to get any kind of security against the property...

Just putting it out there, what level of return and amount of security do people expect from their friends?

[Ivan McIntosh]

I really think you shouldn't have a bar of this. It's a terrible return for the level of risk (which is very high). You won't be able to get any kind of security against the property, because if things go wrong the bank will suck up the available equity. The only basis on which you might consider it is after reviewing their business accounts with your accountant and having it confirmed by your accountant that they are generating more than ample cashflow, and taking security over those businesses.

[kiwidag]

Hello There
I have been just wondering whether I should do it or not?

"sorry, my accountant won't allow it
unless my name is on the title"

All above replies are valid opinions including eri's realistic suggestion which I think you must follow if you proceed down that way. They should pay for all costs including transferring title back to their name when 9 months are over. Your friends would be silly to object to this - I think maybe get them to read this thread (I don't know)?

[Dunning]

150 k @ 10%(premium rate) for 9 months = $11,250. Lawyers fees $2,000 your left with $9,250

You've paid interest on your overdraft @5.5%(guess)costing you $6,187.50.

That leaves you a profit of $3,062.50, after tax @30% your left with $2,143.75

Actual return on loan for you is 1.9% PA for a high risk proposal.

If the bank won't lend to them, why should you

[Anthonyacat]

You must consider here, their bank, which has billions of dollars of lending diversified across the country, does not want to lend them that $150k on a house they would have security over. You are looking to lend money to a single undiversified source, unsecured.

If you do still decide to go ahead, at the very least, you'd need to decide on an acceptable premium interest rate, so you're earning something for your massive risk. What do banks charge for unsecured loans now, 12-18%?

[ripeka]

This is a high risk proposition that you are considering both in terms of relationship risk and financial risk - stakes would be too high for me.

However if you wanted to explore it further you would need statements of their personal and business financial position, profit and loss information regarding the medical practices and cashflow forecast statements so you could be assured they will indeed have the funds available to repay you in 9 months. and then run all the financials past an independent accountant for an opinion.

[Bob Kane]

A friend doesn't ask for a loan.

A successful businessperson running 2 or 3 medical centres would simply tap their regular source of business finance.
If they can't do that then they are max'd out and will struggle to repay you.
You wouldn't want your friend to go under, would you?
Your proposed loan could tip them over.

Friends don't let friends drive drunk.
Same with money.

[eri]

"sorry, my accountant won't allow it

unless my name is on the title"

[Learning]

Never lend more money than you can afford to lose. Especially to a friend because if things go wrong you’ll lose both.

How would you feel if they complain about repayments after going on holiday, buying a new car or bringing home a puppy? Once the money is out of your hands it’s your problem if their priorities change.