Mortgages & Creative Financing

Private Money Lenders: How to Fund Your Deals by Forming Powerful Partnerships

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At our local real estate club meeting, I was chatting with another investor about private money during the networking before the meeting and then again after the meeting. (Note: If you don’t go to the real estate club meeting AND the meeting after the meeting, you are missing out.) We were talking about how a deal that our team had put together last year and the fact that we utilized private money to do the deal. The person I was talking with emailed me this morning to ask for more info. He is doing great using hard money lenders; however, he would like to cultivate a few private money lenders. He wanted my advice, and poor guy — now he is getting an entire blog post about it.

Now, before we go into cultivating private money lenders, let’s first consider the ways we might partner. Sometimes my private money lenders wanted a flat fee of $5,000 — not bad until you work that into an interest rate for a deal that took less than 60 days. Other private money lenders wanted 40 to 50% of the profits; again, a great deal. Other times, the private lender only got paid 10% interest — a great deal for us and really cheap money if we could turn the deal fast enough. Still, there was the one time we had a house that didn’t go as planned and took almost a year to evict the previous owner, rehab and sell, and, well, that one made the private lender a good deal.

So, before you run out and try to find a private partner, you might check in with the local hard money lender; it might just be a better deal. As you build your portfolio of completed deals, you will be able to cultivate more people who are willing to partner with you or lend you money on the deal.

Private Money Lenders: 10 Ways to Cultivate Relationships to Fund Your Deals

Brag a Lot

Ok, don't be obnoxious about it, but tell people what you do. Our first private money lenders were our insurance agent and family members. We were borrowing money from a local bank for our rehab loans; they made those back in the day. Our insurance agent noted we kept buying and selling houses, and based on how often he was insuring us and then canceling insurance, he decided he wanted in on the deals. We also shared every deal with family, and one day they asked us how much we were paying the bank for money and if they could lend to us for less than the bank, would we partner with them? All of this is because we told them what we were doing.

Now, along the lines of bragging a lot, it is helpful to have something you could actually show people. We created two items we used to show people what we were doing. One was a website where we could share more information and the other was a “brag book” of sorts. Both had a section that explained what private lending or partnering actually is and a section explaining how we protect the private lender. Then we had page after page or blog post after blog post showing all of our deals — the good and the not so good. In each we shared the story of the deal, the photos and the numbers from what we paid for it, what rehab and holding costs were, our profits AND the private partner’s profits.

The bragging works, but takes time. When you want to condense that time, having a marketing piece like the brag book or the website gives someone a place to go to learn more about you.


This is where our next private money lenders came from. We attended a workshop with Alan Cowgill, who talked about putting together a presentation explaining who he was, some example deals, having a credibility kit (my brag book and website), and then having luncheons where you invite people of high net worth. But to me, that felt too much a life insurance or financial planner that “stalks” old people. So instead, I approached the local real estate group and offered to have workshops explaining how private lending works and how self-directed IRAs work. For my first class, I charged people a small fee and had about five people who came to two different two-hour workshops.


The first was how to protect yourself as a private lender. This one explained what a private lender was, told them how to screen and select potential borrowers and how to protect themselves with the paperwork. It ended with a couple of example deals that I had done with my first private money lenders from #1. The second workshop went into self-directed IRAs and included an informational packet on self-directed IRAs that I received from IRA Custodian. Out of that I found two potential private money lenders, and one who had enough money to actually fund a few of our wholesale deals out of his self-directed IRAs.

Related: 10 Smart Tips for Building Trust With Private Money Lenders

Teach Some More

Take on a few newbies. As leaders at our local real estate club, we were in the front of people a lot, and newbies naturally flocked to us. They didn’t bring much to the table in the way of a trade — they had no knowledge and no money. But when a newbie came to us and said, “Teach me to do what you do — and by the way, I have access to cash to fund the deals,” well, then we partnered on deals for several years and taught him the ropes over about a two-year span. We sat down and decided who was to do what and how everything was to be divided up beforehand. And along the way, we learned from him.

So you are sitting there and saying, “No way am I going to go out and start a group — that takes a lot of time and effort,” but you don’t have to. In most areas there is already a group there, and if you join, take part and volunteer your time to teach, write articles, help at the check-in table, take over social media duty, whatever it is that you are good at, and over a few month’s time you can become one of the movers and shakers.

Here at our group, we have several people who have built their status to leadership level because they are willing to share. They volunteer to teach a class, they write an article, they stick around after the meeting to help clean up, they come early to help set up — and that’s when you start becoming the go-to person. Then the newbies who don’t want to spend three years learning the ropes will come to you. Some of them will have the funding to be your private money lender; you just have to be willing to teach them something in exchange. Not a bad deal — you teach, they do all the work and bring the money.

Become Famous

I’m serious. There are many ways to become famous, and most ways are low cost and just require you to put yourself out there a bit. Share your stories in article form, newsletter form, video or audio. So let’s give you some examples.

One person I know here in our area had the backing to fund his deals, but he needed deals so he started a radio show — never mind that he started investing in real estate a few months before; he started a real estate radio show and interviewed people. He became famous overnight.

Another way is to write a book, and while I have not written my book yet, it’s on my to do list. You can self publish a book on and do a product launch so ideally every place on the internet and at your local real estate club is talking about your book. You might even be able to give it away for free on your website in exchange for some contact information and cultivate private money lenders that way.

And one of the easiest ways right now is to become an author for Simply go to BiggerPockets, create your own account and profile and start writing a Member Blog for them. They like longer, well-thought-out articles like this one, not a short two paragraphs that say nothing. After a while they may feature some of your blog posts and possibly ask you to be a writer for this blog, the Real Estate News Blog. After you get to be a featured writer, then your articles go out on their weekly emails and get published on their social media pages.

There are numerous real estate sites out there where you can contribute your knowledge, so pick one or two and start participating.

private money lenders


Now this can be at your local real estate club or other business associations, like the Chamber of Commerce or maybe a trade association around what you do in life outside of real estate. Now, do this monthly at the local real estate club. I go every month and network before the meeting and after the meeting. You will notice the folks that come every month and who are willing to share. These are the people with a circle of folks around them. You’ll notice the movers and shakers of the group are the people who others will bring deals and ask for help — and sometimes these are people with funding.

Let’s talk a bit about networking outside of the real estate club for a moment. One person I know is a dentist by trade, and he has done all of the above. He sat back and thought about the dentists he knows. They make good money as dentists and want to invest for retirement. He took the teaching tip to heart and started explaining the concept of self-directed IRAs, tax-free investing and real estate investing. He focused his training on his fellow dentists — people he already knew and had rapport with as a dentist, but who are not quite as willing to take the time to learn how to invest in real estate and who wanted to get the better returns, tax free on their money. He basically went out and created his own private money lenders, people who had never even thought about real estate before.

Speed Networking Events at Your Real Estate Club

These events are just a fun time, and I have come up with a few lenders every time. Basically in speed networking, you break into pairs, and each person gets a minute or two to give their elevator pitch. After each person in the pair has their turn, you trade partners. So you need to have a clear, concise message or elevator pitch.

“I buy, rehab and sell houses for a profit. We have completed 30 deals. Our average hold time is three months. Our average profit is $15,000 to $20,000 a deal. We utilize private partners to do those deals, and they earn on average $5,000. Do you know anyone who might be interested in earning about $5,000 over three months by lending $60,000?”

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Always be prepared with a flyer or a business card so you can send provide them with all of your contact information and send them to your website.

Self-Directed IRA Events

These events have built-in private money lenders. Now when a large self-directed IRA custodian or administrator rolls into town and holds an event, you will want to attend. There will be three types of people at these events. The first are people like you who saw them speak at the local real estate club and are coming to learn about self-directed IRAs as a beginner or self-directed IRAs as an advanced user. There will also be people there who are already clients of the people putting on the event, people who already have the money saved up and growing, who understand real estate, and would rather lend their IRA money to you than go buy a deal in their IRA. Last are people who are just learning about self-directed IRAs and may have never even heard you could buy real estate with them.

So when you go to these events, have your business cards and your elevator pitch ready. Then while you are networking during the breaks, lunches and before and after, you have something to refer back on and are prepared. And if you happen to find a good fit at the event, follow it up with happy hour after the event — again, the meeting after the meeting is very important.

Use Direct Mail Marketing

This is not my favorite, but I have seen it taught many times, so I want to share it. All of the previous methods deal with a warm market — either people you know or people who are a part of your similar group. With direct mail marketing, you are going after a totally cold market. It has been suggested to me that you create a mastermind group of people who want to talk about some specific topic — real estate investing, self directed IRAs, what have you. Then go out and buy a list of high net worth people in your area from a list broker. Many of the list brokers that cater to the real estate investors offer a potential private lender list. Then in your direct mail piece, you invite them out to your mastermind group or maybe to a workshop where you will teach a concept or maybe a private one-on-one session online. Note that you could just invite them to the local real estate club meeting and ask them to come a bit early or stay a bit late for a one-on-one with you.

Related: The Power of Private Financing: 3 No Money Down Strategies That Actually Work

This is a great way to connect with new people that you don’t know and who are not directly in your current circle of influence. Then once you meet them, you set yourself up as the expert who teaches or leads the mastermind and then you share your knowledge and expertise, showing off and bragging about the latest deal and how it all works. And then tell them how the private lender fits into the deal and ask from time to time if they know anyone who might want to fit into that private lender deal.


Buy Creatively

This means you find a way to take over payments, or it might mean you get the seller to carry your note.

A good friend here in our group buys a lot of deals where she either takes over the seller’s payments with very little money down, if any, then she rents them out for cash flow. Because she needs very little down or for the renovation, she could cultivate private money lenders from the real estate club who only have $5,000 to $10,000 in their self-directed IRA to lend out.

She also may find people who own the house free and clear and agree to seller finance the house to her. Let’s say that she also lease options the house, and they eventually buy the house and pay her off and she pays the seller who financed her off.

You follow so far. The original seller financed the investor, who lease options to the end buyer. The end buyer goes to the bank, gets a loan and pays off the investor and the underlying loan from the original seller. Now, the original seller didn't need the money that badly to begin with or they would not have seller-financed the property in the first place. So when the investor calls the original owner to get the pay off, she can ask,"So once we pay off the loan, what are you going to do with the money? Would you be interested in keeping the same monthly payments with a new loan on a house that I am buying?"

I don’t do a lot of creative buying; however, my friends who do have found this to be a great way to get private money lenders and cultivate your motivated sellers.

Focus on Marketing

You’ll want to actively put out marketing pieces asking for a private lender. I don’t directly market for private money lenders because I keep hearing about hoops you need to jump through to legally market for lenders and not get crosswise with the SEC. This is an area where you should spend some time and money learning a lot more about what you can and cannot do.

So there you have it, folks — how our team here has cultivated our private money lenders. Note that most of them today are friends and family who want the return from a real estate investor without having to put in the time and effort to do what we do. And most of this comes from the number one way to find private lenders: telling others how well you do what you do.

Investors: How do YOU cultivate relationships with private money lenders? What would you add to this list?

Be sure to leave a comment below!

Kim Tucker and her husband Don started investing in Kansas City Real Estate in 2000. Buying, fixing and selling mainly to landlords was the model, Don did the rehabs and being an REO Agent, Kim fo...
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    Richard Guzman
    Replied about 4 years ago
    Excellent article! Some very good points to consider — thanks for sharing!
    Brandon Stevens Investor from Lexington, Kentucky
    Replied about 4 years ago
    Very good article Kim, very good.
    Anna Watkins Investor from Atlanta, Georgia
    Replied about 4 years ago
    Very nice article with enough detail to keep my interest. Thanks! Question for you — where do your new lenders find their “education” so that they become well-informed about their side of the partnership? Do you have resources for them, do they find their own (attorneys? or other?) or do you do the educating yourself?
    Doug W. Flipper/Rehabber from Alexandria, VA
    Replied about 4 years ago
    Great article, Kim. Thanks for going into detail on each method. I look forward to implementing some of these ideas. I, too, heard Alan Cowgill speak once and he showed some samples of a brag book. I thought it was a great idea.
    Kim Tucker Flipper/Rehabber from Kansas City, Missouri
    Replied about 4 years ago
    I really liked Alan’s concept, just not luncheons for old people wealthy people. I get those postcards in the mail, come eat at this nice place and let me tell you how to be rich or invest your money. Yuck – but teaching how to be a private lender and having them pay me quite often to be in the room. Works well – but then my target are people at my reia group who don’t really want to go buy houses, but have the money to invest – this gives them an alternative to tenants and toilets and pays way better
    Tim Wadley from St. Louis, Missouri
    Replied about 4 years ago
    Great and much needed article. I am interested in this type of funding to grow my business.
    Michael Borger Rehabber from San Diego, CA
    Replied about 4 years ago
    Thanks for the great article. You can never stop marketing for private lenders in this business. I try to find some way to steer conversations toward private lending when I’m traveling in certain circles. You never where your next 250k of capital will come from to help you take down the next project.
    Kim Tucker Flipper/Rehabber from Kansas City, Missouri
    Replied about 4 years ago
    Michael, we always end up with a conversation with someone. We like to go out to eat and sit in the bar and strike up a conversation. We do this locally and we meet so many interesting people. Quite often we find they also do real estate in some form or fashion from having 1 rental to being the construction company for Best Buy!
    Jim Carmichael Residential Real Estate Broker from Glenpool, Oklahoma
    Replied about 4 years ago
    Appreciate this article, thank you
    Dave Van Horn Fund Manager from Berwyn, PA
    Replied about 4 years ago
    Great article Kim! I’ve used nearly all of these strategies to much success when it comes to raising money (still working on getting famous!). A few tips I thought I might add: – When starting out, have more favorable terms than what other borrowers offer until you build relationships. As you do more deals, you’ll get a better rate. I would happily pay a pre-payment penalty, that just means I did my deal quicker, made my money, and made money for my lender. This will encourage your lender to lend to you again for the next deal – If you don’t have a track record raising money for a deal and want a reasonable rate, cater to an audience who aren’t traditional real estate investors – Show others you have skin in the game (i.e. you personally put up renovation money, have a low LTV, etc) – Utilize conservative appraisals to appeal to a lender – “Exchange” your IRA money with another IRA investor, funding their deals while they fund yours. – Teach not only about lending, but about how you protect your lenders – teach others about what paperwork you use – teach how you perfect collateral – teach how you would have the lender named insured on the homeowner’s policy Teach whatever a hypothetical lender would need to know. This way your students feel safe and comfortable lending to you. Best, Dave
    Kim Tucker Flipper/Rehabber from Kansas City, Missouri
    Replied almost 4 years ago
    Great Points Dave – Looking forward to seeing you raise private capital tonight in my room . . . and sharing a bit about notes in the process !! Hope you have time and energy for our meeting after the meeting . . . we usually hit the hotel bar for an hour or so for soda’s and appetizers or dinner for some people after our meeting . . .
    Kim Tucker Flipper/Rehabber from Kansas City, Missouri
    Replied about 4 years ago
    Dave you are spot on – the first private lender, when we figured out the percentage he was paid on his flat fee earned 80% return. When we started using private money in earnest, we split the deal 50/50, but over time as we gained experience, we don’t do that any longer but pay out 10% for the use of the money. The 50/50 guy was in real estate and new he could get 50/50 from a person just starting to use private money. The 10% money, well actually it’s down to 3 to 4% on our long term stuff, with people who are not in real estate and don’t like 2% from the bank and just do not trust the stock market or annuities. We managed to never have any of our skin in the game, however if the deal went south, we didn’t get to eat that month. We didn’t actually use an appraisal either – but we were very conservative in our numbers and we had a huge book of completed deals that showed even the bad ones didn’t loose money. Love the IRA exchange model. And sharing our paperwork is one of the best things we can do to put them at ease. We primarily only borrowed for houses and by the time we got to notes, the private lender there, basically said keep his money busy and don’t bother him, just keep paying him monthly. (really need to start a fund – can’t wait till you have a course on that). Dave all excellent points, looking forward to seeing you at MAREI in March!!
    Account Closed Lender from Charlottesville, Virginia
    Replied about 4 years ago
    Extremely interesting and well-done blog. You touch all the bases. I will keep in touch with your posts. I plan on writing a blog on creating “preferred shares” for investors in LLC’s created to invest in individual properties. Its a new way for private lenders to invest in real estate with protection. Keep in touch. Richard
    Charles Hammon Engineer from Saint George, Utah
    Replied almost 4 years ago
    I would be very interested in your LLC’s investment structure ideas.
    William Grobman from Savannah, Georgia
    Replied about 4 years ago
    @KimTucker “Works well – but then my target are people at my reia group who don’t really want to go buy houses, but have the money to invest – this gives them an alternative to tenants and toilets and pays way better” That’s me! I don’t really want to go buy houses I just want my money to go to work for other people so we can all have the triple win. I don’t want tenants and toilets (I like that phrase). We have tenants in a Minnesota rental that we couldn’t sell (without a loss) back in 2008 after the bust. Nothing worse than being a reluctant landlord. At any rate, we have money parked in a regular bank account doing absolutely nothing and I have been researching where to put it to work. The wife and I had always discussed doing fix and flips but the reality is we just don’t have the knowledge nor the time. I have found an REIA group here in Savannah, GA but have yet to attend, although I will in January. So, I am looking for individuals that need a private lender in the Georgia area. I think starting out I should stick to local so we can have eyes on the project. Another question I have is should we be putting that money in a self-directed IRA and THEN lending it out to take tax advantages? In the meantime I continue to read BP and learn! Eagerly awaiting my first REI deal. Hello Georgia! Anyone there? Bill G
    Christopher Stephens
    Replied almost 3 years ago
    Mr Bill I’m local. Run a construction company in town. I’m needing a lender to lock in fix and flips, plus longer term MF
    John Maina from Boston, Massachusetts
    Replied about 4 years ago
    Nice post kim. Could you outline the documents needed to protect both sides of the equation? A how to structure a private money deal (step by step – generic at least) would be awesome. Thanks for the article.
    Christopher Salazar Investor from Chicago , Illinois
    Replied almost 4 years ago
    This article is gold. Thanks for sharing!
    Richard Clayton Residential Real Estate Broker from kihei, Hawaii
    Replied almost 4 years ago
    Great article Kim, I learned a great deal. Especially asking a seller to invest after you pay off the seller financing. Brilliant! Respectfully, Rich Clayton
    Kenneth Barr from Herndon, Virginia
    Replied almost 4 years ago
    Thank you so much for sharing this Kim! K.C. and Pilar
    Mikael Winkler Rental Property Investor from Columbus, OH
    Replied almost 4 years ago
    Great article! I’m one of the “newbies” and have been looking to private lending as a financing option. Thank you for the insight!
    Teniecha Cowart Real Estate Broker from Atlanta, Georgia
    Replied almost 4 years ago
    This post is very interesting and It has some good ideas about networking. I never would of thought about that creative financing strategy. Thanks a lot!
    Kerry Baird Rental Property Investor from Melbourne, FL
    Replied over 3 years ago
    I really enjoyed reading this article because there were so many actionable points within. I’ve never used hard money, nor private lending…just saved up for conventional funding. I’m going to dig in and learn more on this topic.