Mortgages & Creative Financing

Understanding Private Lending – Part 3: How to Find Private Lenders and Get Funded

Expertise: Flipping Houses
19 Articles Written

Oh have faith yea disciples of the deal; it is possible to find a lender who will loan every penny of the purchase price of a property. Just like it is possible to find a property that can be bought with no money down, but know that both endeavors can be laborious. Real estate is one of the few business games where the ante is affordable to anyone with a little gusto, and success is possible for those with a lot of diligence and perseverance.

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Where to Find Private lenders

  1. Classifieds advertising sites such as Look under services and financials.
  2. Do an internet search using any search engine type in “hard money” or “private money loans” etc.
  3. Check your local newspaper classifieds under money to lend or finance.
  4. Go to your Real Estate Investment Groups meetings.
  5. Check out the BiggerPockets Hard Money Lenders Directory.
  6. Network with other real estate investors to see who they use.
  7. If all else fails you can even call mortgage brokers.

Researching Lenders

Search far and wide and you’ll find a couple of good private lenders. There are no certifying bodies for private money and there is no central association. Anyone with a lot of money can essentially lend it out, so sometimes you may run into a lender who is not legitimate. You can try to check your lenders out by going to the better business bureau website at or you can go to the Department of Commerce website. Rarely have I found much on either sight pertaining to a specific private lender.

I like to use Microsoft Excel to build my own black white and gray list. This way you can put in all of the lenders’ information into individual cells. When you come across a new lender you can search them in your own database by phone number, business name, address, individuals name etc. One time I made contact with a lender that just didn’t sound right so I searched his information and found that his phone number was the same for lender I had on my black list, but the name they were using was not the same anymore. That probably saved me a lot of hassle.

What to Expect When You First Contact

Most of these Private lenders don’t want to hear from you until you have an actual deal, but most of you will want to know you have funding before you put out offers on a property — And, you will want to know the costs of that funding so you can price it in to your action plan.

You should just expect that a private loan is going to cost you approximately 15% interest and 4-6 points up front. Count on that. If you’re putting up more money then you can negotiate better terms. Be prepared to be treated like a no-body. Every private lender I know tells me that they treat every first time caller like they just got out of their first real estate guru seminar. The only way to get funding on that first deal is to make contact with several private lenders and submit that property to all of them for funding.

BTW – There are posers in private lending too. There are people who just don’t have the actual resources to fund or have very limited funds. So, they can run out of money before they get to you, even though you’ve been given a pre-approval . . . be sure to have a back up!

Presenting The Deal

Private lenders are used to hearing big talkers and braggers and they will probably expect that you are more likely just another one, until proven otherwise. However, be professional and confident. Your professionalism will show in your deal presentation. Have it assembled when you first contact them for funding. Here’s what you should have:

  1. Property Address.
  2. Photos (as many as possible) of the subject property.
  3. List of repairs and associated costs.
  4. Good PROFESSIONAL comparable sales. These sales should have closed within the past 6 month and be no further than 1 mile away from the subject property. Do not use Zillow or some like website. Go to a realtor and if necessary, pay them $50 to put together a CMA for you.
  5. Rough schedule and exit strategy.
  6. Team member bios (Realtor, property manager, contractor etc.).
  7. Project summary: Neighborhood info. Incomes, population growth, jobs etc.

For one of my fundings, I showed the lender that the county’s average household income was over $90,000 and the median home price was just over $200,000. That came out to be a price to income ratio of just over 2 when normally anything under 3 is good. All that information is very easily accessable on your county’s website information found at

Build a Portfolio

Once you have deals under your belt, start documenting your success to present to future lenders. Some of them will say that they don’t care about you — they base their lending entirely on the property. But, I guarantee it makes them feel better to see that they have someone with some experience. It just might be the difference on getting funding for a tight deal.

The Package

It’s not difficult to do. Just compile a few choice pictures (before and after) and then include the HUD-1 form that you sign at closing when you purchased the home, and the HUD-1 that you signed at closing when you sold the home. Those forms will show the buying and selling information on the home for both transactions, to illustrate your profit or success. I once sought funding for a deal and had a lender turn me down. So I got the deal funded with another lender and it worked out. Upon completion of that deal I took the time to compile the information above and send it to the first lender with a professional note on how the project worked out. That lender funded my next project at a great rate and is now my preferred lender.

Justin’s work ethics and values are based on his small town western upbringing and eight years of active duty in the United States Marine Corps. He currently resides in the D.C. area. He holds a BA in Management, a Masters in Business Administration and an active Virginia Real Estate Agent license.

    Replied almost 10 years ago
    Do you have some samples of ads you put on CraigsList? Do you offer a specific interest rate?
    Dick Rosen
    Replied almost 10 years ago
    Good stuff Justin, thanks for the post and I look forward to more!
    Justin Pierce
    Replied almost 10 years ago
    Steve, I am not a lender. I am a heavy consumer of private funds. I do have some good examples of the ads I have responded to. I will get those up. I am in the wilds of Utah right now. I have to come down to the city a couple times a week to get internet access. But, its so nice to be out of communications sometimes. I will be back in my office next week and I’ll get those articles for you. Thanks for the comment. Justin
    Justin Pierce
    Replied almost 10 years ago
    Dick, Thank you. I am on vacation in the middle of no where so it wasn’t easy getting this done. I will continue to do my best. Feel free to ask me questions about things you would like to know. I’m always looking for new ideas for posts. Justin
    Justin Pierce
    Replied almost 10 years ago
    Dick, Thank you. I am on vacation in the middle of no where so it wasn’t easy getting this done. I will continue to do my best. Feel free to ask me questions about things you would like to know. I’m always looking for new ideas for posts. Justin
    Brandon Turner
    Replied almost 10 years ago
    Great Post! I had one more important area to suggest to find hard money lenders – your Realtor (other other Real Estate Agents). Find the real estate agents (or better yet- the brokers if possible) who are working with other investors and ask them for names of lenders. This is how I found mine. My agent knew of several he had worked with, and introduced us.
    Justin Pierce
    Replied almost 10 years ago
    Good points,Brandon. The key point would be to find an actual investor’s realtor. I am a realtor and I find all too many realtors do not know much about investing at all. For the most part realtors concentrate on the process of selling a home and how to navigate the pitfalls and legalities of that process. Beleive me that is a full time job in just a standard sale. The other thing is that so many investors keep their funding sources pretty secret. But, it is certainly worth the time to ask. Thanks for the comment. Justin
    Replied almost 10 years ago
    Terrific information.Such a blessing for us “Newbies”.Love this site!!!!!Will keep this site as my #1 RE reference for THE BEST ADVICE FOR NEWBIES.Thanks and keep on doing what you do.
    Replied about 9 years ago
    Great article Justin. Your information is still very useful in today’s market.
    Omar Johnson
    Replied almost 9 years ago
    Private lenders can be regular people like the postal worker, the retiree etc. The bottom line is these people are usually earning a low return on their money at the bank and can be enticed to join your private lending program simply by you offering them a higher return on their money than they are currently receiving.
    Justin Pierce
    Replied almost 9 years ago
    True, just be careful what you promise. Make sure you stay clear of the securities and exchange rules. Offering a percentage return on money for mortgages to strangers puts you right smack in the middle of the SEC’s radar. You can pitch grandma and avoid the SEC but it that can make for an uncomfortable Thanksgiving dinner.
    Joel Owens
    Replied almost 9 years ago
    Yes to me there is a very clear distinction between hard money and private money. The 15% and 4 to 6 points is very high and I consider them hard money at those rates. Private money is from doctors,lawyers,and other professionals etc. that have a lot of money but no time to speak of. Private money can be had at say 9 or 10% with no points. I have found that using hard money makes doing deals really hard as they suck away most of your profit.Much better for me is a cash partner or JV interest. I list properties all the time for clients and get investors that say “This is all I can offer to make the deal work.” We end up selling to another buyer.The fact that you as an investor has to used hard money,or that you can only put 10% down and have to pay a 9% interest rate makes no difference to the sellers value.The property is still say for instance worth 1 million and not the 700k you are offering to make your financing work. So usually we well to a buyer putting 20 to 25% down for a 6 percent interest rate,or they pay cash ( sell sometimes this way but they want a low price),the buyer uses private money,or they do a 100 percent loan with a JV equity share for a collection of net rents. I played the hard money game and you just can’t make the numbers work in most cases.You get beat out by other buyers with better forms of financing.
    Bob Rowe
    Replied over 6 years ago
    Justin,this my situation.Can u help? I own 13.19acres of lake property on Lake Livingston,1hr.north of Houston TX. I’m about 75% finished w a 2200sq.ft. house and I’m out of money. I need about 50k to finish and also need about 60k for my logging business to get it back going right(been a tough year). I don’t owe anything on the house or property and it will appraise for 500k or so. My credit has taken a hit due to a divorce 2 yrs ago,credit score is bout 615….I have another house in town I can make my homestead. I have not filed a homestead on either property…can u help?
    Justin Pierce
    Replied over 6 years ago
    Rob, Very sorry for the delay. I don’t know any lenders specifically in Texas so I can’t give you a direct contact. But, this deal shouldn’t be too hard to get funded. I was in similar situation a few years ago with a custom log home that the buyers walked away from right in the middle of the financial colapse. I was left holding the bag on a 30% complete log home. I went to all the local players and got a private loan to finish the home and then I refied out with a portfolio loan from the local bank. You need to find some local players. The private financing group on is a good place to start. I also like I just did a quick search and found a group for private financers in Texas: Your best bet will be to find someone right in Houston. Find as many players as you can. Don’t just call one or 2, call many. There are many people who call themselves lenders but they’re really middlemen of different flavors. Sorry I couldn’t be of more help. Good luck.
    Replied over 5 years ago
    Like Steve,I would like a list of samples, you use to send to leandes