Guide To Finding Private Money For Real Estate Deals — The Quick Read: Private money comes from individuals, small groups, or pooled funds. They lend against a deal’s numbers, not a borrower’s paycheck. Finding it means working three channels at once: people who already know you, professionals who already touch real estate deals, and lenders you’ve never met but can find through public records or direct outreach. Every private loan gets papered with a promissory note and a deed of trust. The leverage on offer usually tracks the property’s after-repair value, not a bank’s checklist. Most investors treat it as a bridge. Private money gets the deal closed and stabilized. Then a long-term rental loan takes over.
Key Takeaways
- Private money is asset-first. The property and the plan matter more than a credit score or a paystub.
- Three source pools exist: your personal circle, your professional network, and strangers found through records or cold outreach.
- Two documents run every deal — a promissory note (the IOU) and a deed of trust or mortgage (the lien that secures it).
- Leverage on hard money and private money loans tracks completed-project experience and after-repair value, not a flat rate-sheet number.
- Raising money from multiple outside investors can cross into securities law — a different compliance lane than a single private lender writing one check.
What “Private Money” Actually Means
Private money is capital from a person, small group, or pooled fund. They lend against real estate for a return. They are not a bank, credit union, or agency lender. Private money sits next to hard money on the same spectrum. Hard money implies a more institutionalized lender running set programs. Private money is often negotiated deal by deal, with no standardized underwriting framework, per Wikipedia’s overview of private money investing. Some markets have pushed this further into formal mortgage funds. These funds operate almost like small banks. They pool capital from trusts, LLCs, and even pension money, then lend it out for a fee.
What this loan actually costs to carry in your market.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
The industry has also been rebranding itself. Trade groups now push “private lending,” “bridge lending,” and “transitional lending” as more accurate terms than “hard money.” The old label suggests something rougher than what most of these deals actually are.
Key Terms Defined
Private money — capital lent by an individual, small group, or fund, secured by real estate and priced on the deal rather than the borrower’s income.
Promissory note — the borrower’s written promise to repay, spelling out the amount owed and the terms; the lender keeps the original and it’s never recorded publicly.
Deed of trust (or mortgage) — the recorded document that places a lien on the property, securing the note and giving the lender a path to foreclose if it isn’t paid.
After-repair value (ARV) — the property’s estimated value once renovations are complete; most leverage on a rehab deal is capped as a percentage of this number, not the purchase price.
Business-purpose loan — a loan made to acquire, improve, or hold real estate for investment rather than as a primary residence, which changes which consumer-protection rules apply.
Accredited investor — a legal status that lets someone invest in private securities offerings; qualification runs through income, net worth, or certain professional licenses.
Where Do You Actually Find a Private Lender?
Start close and work outward. Your personal circle — friends, family, former coworkers — is usually the fastest source of a first check. But it’s also the one where a sloppy handshake deal does the most damage to a relationship if the numbers go sideways. Papering these loans properly, with a real note and a recorded lien, protects both sides.
Your professional network is the next lane, and most people don’t use it enough. Title reps, closing attorneys, appraisers, insurance brokers, contractors, and property managers all touch other investors’ deals. Someone in that circle likely already knows a private lender, or is one. A short, specific ask (“I’m closing on a duplex, need bridge capital, here’s the deal”) travels faster through that network than a cold pitch ever will.
Beyond your existing contacts, three tactics reach people you’ve never met:
- Public record searches. Every recorded deed of trust is public. Pulling county records on recently financed investment properties shows you who’s actively lending private money in a given area. That’s a far more targeted list than a cold mailing list.
- Investor meetups and local real estate associations. These rooms are full of people who either lend privately or know someone who does.
- Online investor communities and private-lending directories. Forums and lender-profile sites let you compare terms before you ever pick up the phone. Still, vetting matters more than the listing itself.
For a deeper walk-through of prospecting tactics, check Lendmire’s guide on how to find private money lenders for real estate deals. It goes further into building that outreach list.
Which Lender Type Fits Which Deal?
| Lender Type | Where You Find Them | Documentation Formality | Best Fit For |
|---|---|---|---|
| Friends & family | Personal circle | Informal by instinct, needs formal paperwork anyway | First deals, small gap funding |
| Professional network | Referrals from agents, title, CPAs | Referral-driven, standard paperwork | Repeat investors with a track record |
| Public record / cold outreach | County records, mailing lists, direct calls | Formal from the first conversation | Investors without an existing network |
| Pooled/syndicated funds | Funds, mortgage pools, LLCs | Highly formal, securities-law aware | Larger deals, multiple properties |
How Private and Hard Money Lenders Actually Underwrite a Deal
Underwriting on a private or hard money file starts with the property, not the person. Across Lendmire’s wholesale network, leverage on a fix-and-flip file tracks completed-project experience. Investors with five or more finished projects can reach up to 93% of project cost. That drops to 90% at two or more completed projects, and 85% for investors with fewer than two. Every tier is still capped at 75% of after-repair value.
Other structures scale differently. Bridge purchases without a rehab plan can run up to 80% of purchase price. Cash-out and rate-term refinances typically cap around 65% of value. Ground-up construction reaches up to 90% of cost, or 75% of completed value, once an investor has three or more finished builds. Draws can fund up to 100% of the rehab budget itself. That’s a separate number from purchase leverage — it gets released against completed work, not at closing.
Credit floors sit around 620, with tighter conditions below 660. First-time investors typically qualify only at the lower leverage tiers. Terms run 6 to 18 months, interest-only, with no prepayment penalty. There’s no multi-year hard money structure in this network. Investors who need a longer runway generally refinance into long-term rental financing once the property is stabilized. Loan sizes run up to roughly $5,000,000, with larger deals considered by exception.
Collateral stays non-owner-occupied: 1-4 unit residential, or up to 10 units on ground-up construction. Commercial buildings, raw land, hospitality properties, and owner-occupied homes aren’t part of this program. Lendmire (NMLS# 2371349) arranges these loans through select lenders across 40 markets, including Washington, D.C. That said, the network doesn’t reach every state right now. Los Angeles-area files, Minnesota, North Dakota, South Dakota, and metro-specific overlays in Baltimore, Chicago, and Detroit fall outside it. Every figure above varies by lender, property, and borrower experience, and none of it is a commitment to lend.
A note on entity lending: private and hard money loans to LLC-titled entities are common in this space. But they’re subject to program eligibility that varies by lender — this is not a blanket exemption from every other requirement.
How Private Money Deals Get Papered
Every private loan produces two documents, and each one does a different job. The promissory note is the borrower’s written IOU. It names the amount owed and the terms, and it stays private with the lender. The deed of trust (or mortgage, depending on the state) is the document that gets recorded. It creates a public lien and names a party who can foreclose if the loan goes unpaid, according to a Sacramento County Public Law Library guide on the two documents. Closing mechanically means notarizing signatures. Then the executed note and deed of trust go to the county recorder’s office where the property sits.
Most private money loans are made for a business purpose rather than personal use. Because of that, they typically fall outside the disclosure rules that apply to a consumer mortgage. There’s no standardized closing-disclosure timeline, and no rescission period. RESPA’s own regulation carves out an exemption for credit extended primarily for a business, commercial, or agricultural purpose, per CFPB’s regulation on RESPA coverage. That exemption isn’t automatic, though. A lender still has to determine the loan’s purpose deal by deal — not just assume it because the borrower used an LLC.
Can You Pool Money From Multiple Private Investors?
Yes — but the moment you raise capital from other people to fund deals, instead of lending only your own money, the arrangement can shift. It can turn from a simple loan into a securities offering. Rule 506(b) of Regulation D gives a company a safe harbor to raise unlimited capital from an unlimited number of accredited investors without public advertising, per the SEC’s overview of Rule 506(b) private placements. Accredited status is an either/or test. You need income over $200,000 individually (or $300,000 jointly) for two straight years, with the same expected going forward. Or you need net worth over $1 million, excluding a primary residence. Or you need to hold a Series 7, 65, or 82 license, per the SEC’s investor-education bulletin on accredited investors. This is the structure behind most multi-family syndications. Lendmire’s breakdown of private money syndication for multi-family real estate investment covers how that pooled structure typically gets built.
Where the General Rule Breaks
Business-purpose loans are not universally exempt from state usury caps. That’s the single most common misconception in this space, and it costs lenders real money when they get it wrong. California is the sharpest edge case. Usury law there applies to every loan unless a specific carve-out fits. Loans made by banks, credit unions, licensed finance lenders, or brokers arranging property-secured loans are typically exempt. Business loans of $300,000 or more to a corporation or LLC may qualify too, according to a California usury law summary. Other states apply usury limits regardless of purpose, especially when the lender isn’t licensed.
Licensing is a separate trap from usury entirely. In some states, making a private loan — even a large one secured by commercial property — still requires a mortgage lending license, no matter what usury exemption applies. Investors sourcing private capital for residential rentals specifically should also see Lendmire’s page on private money lenders for residential real estate. It covers how that plays out on smaller, non-owner-occupied deals.
From Private Money to Permanent Financing
Private money is almost always interest-only with a lump-sum payoff. It’s built as a bridge, not a permanent hold. That’s the whole economic logic of the product: capital that exists to be replaced, not held for years. Once a property is renovated and rented, many investors refinance that private note into long-term rental financing rather than let it mature. Lendmire’s page on hard money loan exit strategy for real estate investors covers how that transition typically gets timed and sequenced.
The follow-on loan most investors land on is a DSCR loan. It qualifies primarily on the property’s rental income covering the monthly payment, subject to lender guidelines, rather than traditional personal-income documentation. Lendmire’s complete DSCR loans guide walks through how that qualification actually works, step by step.
Sloppy paperwork on the private loan can slow this exit down. A lien release or reconveyance has to be recorded when the private note is paid off. The note itself gets marked paid and returned to the borrower. Title work on the new refinance depends on that clean chain of record. An unclear payoff statement, or an unrecorded reconveyance, can hold up the takeout loan longer than the property itself ever needed.
Common Mistakes That Slow These Deals Down
- Treating a friends-and-family loan too casually — no note, no recorded lien, no clear repayment date.
- Assuming an LLC borrower automatically clears every consumer-protection rule without confirming business purpose deal by deal.
- Skipping a reference or licensing check on a lender you’ve never worked with before.
- Not confirming state usury and licensing rules before assuming a business-purpose exemption applies.
- Letting the payoff paperwork on the private loan sit unrecorded, which can delay the refinance that’s supposed to replace it.
This article is for general information only and isn’t legal or tax advice. Usury exemptions, licensing requirements, and securities rules vary by state and by structure. Investors should talk to a qualified attorney or CPA about their own deal before relying on any of the general patterns described here. Review details for any refinance or purchase loan are always subject to lender overlays.
Frequently Asked Questions
Is private money the same thing as hard money?
Close, but not identical. Private money usually means an individual or small group lending personal capital, with terms negotiated deal by deal. Hard money implies a more institutionalized lender running standardized programs. Still, the line has blurred enough that trade groups now push “private lending” or “bridge lending” as umbrella terms for both.
Do I need to be an accredited investor to borrow private money?
No. Accredited-investor status matters for the lender side of a pooled fund, not for the borrower taking out the loan. It only becomes relevant if you’re the one raising capital from multiple outside investors to fund your own deals. That shifts the arrangement toward securities law.
Can I use private money for just the down payment, or does it have to cover the whole deal?
Both structures exist. Some private lenders fund the full purchase and rehab as a bridge loan. Others provide gap funding layered under a hard money first position. The split usually depends on the lender’s position in line to get paid back if the deal goes wrong.
How is underwriting different from a bank loan?
A bank underwrites the borrower — income, credit history, debt ratios. A private or hard money lender reviews the property’s rental income and the plan instead. After-repair value, completed-project experience, and exit strategy carry far more weight than a credit score.
What happens if I can’t repay a private loan when it matures?
That depends entirely on the note’s terms and the lender’s willingness to extend, and it varies deal by deal. There’s no standard grace period. That’s why lining up a permanent refinance exit before the note matures matters more with private money than with almost any other financing type.
If you’re holding a stabilized rental after a private money bridge, and want to see how the payment covers refinance based on the property’s income, credit profile, and target leverage, Lendmire can help compare DSCR loan options against your goals. Reach the team at 828-256-2183 or request a quote directly through Lendmire’s mortgage quote form.
Hard money often opens the deal, and a refinance typically closes the chapter – see refinancing out of a hard money loan with a DSCR loan.
About Lendmire
As a non-QM mortgage broker (NMLS# 2371349), Lendmire facilitates DSCR investor loans across 40 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income instead of personal income documentation, subject to lender guidelines. This serves LLC-structured portfolios and self-employed borrowers who don’t fit conventional boxes. Lendmire is a two-time Scotsman Guide Top Mortgage Workplace (2025, 2026).
Many investors treat hard money as the acquisition tool and plan the exit up front – see refinancing out of a hard money loan with a DSCR loan.
Lendmire’s Top Mortgage Workplace recognition is documented by Scotsman Guide 2025 Top Mortgage Workplace and Scotsman Guide 2026 Top Mortgage Workplace.
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References
1. Wikipedia — Private Money Investing
2. Sacramento County Public Law Library — Deed of Trust and Promissory Note Guide
3. CFPB — Regulation X, RESPA Coverage (§1024.5)
4. SEC — Private Placements Under Rule 506(b)
5. Understanding California Usury Law
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.
