Private Money Lenders: How to Find Them and Structure Deals

Private money is the secret weapon of experienced investors. It is faster than a bank, cheaper than hard money, and infinitely more flexible than either. The catch: you have to build the relationships yourself, pitch the deals yourself, and hold up your end of the bargain every single time. Done right, one good private lender can fund the next 20 deals of your career.

This guide covers who private lenders actually are, where to find them, what terms to expect, and how to structure a deal that protects both sides.

Who Are Private Money Lenders?

A private money lender is an individual — not a bank, not a fund — who lends their personal capital secured by real estate. They are not in the lending business; they are simply people with capital looking for a better return than they get from CDs, bonds, or the stock market.

The four most common types

High-net-worth individuals (HNWI). Doctors, dentists, business owners, executives — anyone with $250K+ of investable cash sitting around earning 4% in a money market. A 9% mortgage secured by real estate is more attractive than the alternatives.

Family and friends. The starting point for most investors. A parent, sibling, or close friend with retirement money may lend to you on a deal at terms that beat their savings account and beat your hard money option.

Self-directed IRA holders. Investors who have rolled retirement money into a self-directed IRA can lend that money out to other real estate investors. The interest grows inside the IRA tax-deferred. Read more in our self-directed IRA guide.

Family offices and small partnerships. Once you graduate from individual lenders, semi-professional capital pools exist that lend privately on real estate. They are pickier than individuals but can write bigger checks.

Where to Find Private Money Lenders

Real estate investor meetups (REIA)

Every metro has a local REIA that meets monthly. Some attendees are active investors; many are passive — they want to be in real estate without being landlords or flippers. They lend instead. Show up consistently for 6 months and bring real deals to discuss; the lenders will introduce themselves.

Networking outside real estate

The best private lenders often are not at REIA meetings. They are at chambers of commerce, country clubs, professional associations, and charity boards. Doctors and dentists are particularly common — they have high incomes and limited time to manage their own investments.

Family offices

If you do larger deals ($500K+), family offices that manage HNWI capital sometimes carve out a sleeve for private real estate lending. Most are introduced through wealth managers or attorneys.

Your existing network

The most overlooked source. Anyone who has done well in business, sold a company, or inherited money is a potential private lender. The mistake most investors make is not asking, or asking poorly.

Typical Terms

Interest rate

8% to 12% is the normal range. Friends and family often go as low as 6% to 8%. Sophisticated HNWI lenders charge 10% to 12%. The number depends on the lender's alternatives — what return are they comparing yours to?

Points

Sometimes 0, sometimes 1 to 2. Many private lenders skip points entirely if the rate is high enough. Others charge 1 to 2 points to cover their own setup costs.

Term

6 to 24 months for short-term deals (flips, BRRRR rehabs). 5 to 10 years with a balloon for longer holds. Some private lenders will fund a 30-year amortizing note — rare but real.

LTV

Most private lenders cap at 65% to 75% of value. They want a healthy equity cushion in case they have to foreclose. Some go to 80% if they trust the borrower.

Personal guarantee

Almost always required. Even with the property as security, lenders want personal recourse if things go wrong.

Legal Documents You Need

This is non-negotiable. A handshake deal with private money is a lawsuit waiting to happen. Every private money loan needs three documents at minimum:

Promissory note. The IOU. Specifies loan amount, rate, payment schedule, term, default terms, and prepayment provisions.

Mortgage or deed of trust. Records the loan against the property at the county recorder. This is what gives the lender the right to foreclose. Without it, your private lender is unsecured.

Title insurance. Protects the lender's lien position. Most private lenders require it.

Hire a real estate attorney to draft these documents. Expect to pay $500 to $1,500 per loan. The first private lender deal is the most expensive; subsequent deals reuse the templates.

How to Pitch a Deal

The pitch is simple — but most investors do it badly. A good pitch covers six things on a single page or short email:

The property. Address, photos, current value, after-repair value if applicable.

The numbers. Purchase price, rehab budget, ARV or rental income, projected cap rate. Run the deal through a cap rate calculator first.

The loan request. Loan amount, interest rate, term, LTV, points, security.

Your equity. How much of your own money is in the deal. Lenders want skin in the game.

Your exit. How and when the loan gets paid off. Refinance, sale, cash flow.

Your track record. Past deals you have completed. If you are new, who is on your team — contractor, agent, attorney.

An Example Structure

You find a $200,000 property that needs $30,000 in rehab and will rent for $2,200. You bring $40,000 of your own money and need $190,000 of financing.

Private lender terms: $190,000 loan, 9% interest, interest-only payments, 12-month term, 1 point at closing. Monthly payment: $1,425. Total interest if held 12 months: $17,100. Plus 1 point: $1,900. All-in cost of capital for 12 months: $19,000.

Compare to hard money at 11% with 2 points: 12 months of interest is $20,900 plus $3,800 in points = $24,700. The private money deal saves $5,700 — a meaningful chunk of profit on a single rehab. Compare full cost using the calculators at mortgagemathlab.com.

How to Keep Private Lenders Coming Back

The first private money loan is the hardest. The tenth is the easiest. Why? Because by the tenth, the lender knows you pay on time, communicate proactively, and never surprise them.

Pay on time, every time. Set up auto-pay. A single late payment in year one closes the door on year two.

Communicate proactively. Update them monthly with progress photos and rehab status. Lenders hate being ignored.

Pay off as agreed. If the loan term is 12 months, refinance or pay off by month 12. Do not extend casually.

Bring the next deal. A lender who funds you once and never hears from you again finds another investor. Bring deal #2 before deal #1 even closes.