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How to Find Private Money Lenders and Finance Your Deals

Anson Young
7 min read
How to Find Private Money Lenders and Finance Your Deals

To leverage more deals than you have cash for, you can get capital from private money lenders. Unlike a traditional mortgage loan, hard money lenders care more about your real estate track record than your credit score. They want to be protected by having a first deed of trust—or the primary mortgage—on the property. That means their money is secured by a hard asset. If you don’t pay, the property serves as collateral.

Unlike hard money lenders, private money lenders are more relationship-based. They may even be a friend or family member.

Before we delve into finding lenders, it’s important to know how to use private money. The simple answer? Any way that you and the lender can agree to. You can use it for buy and hold, fix and flip, and everything in between. Lending terms can be short or long term; money can come in lump sums or installments, with or without interest payments, with profit-sharing or not. The possibilities are only limited by you, the lender, and the creativity you both bring to the table.

Now that you know what private money is and the ways you can use it, let’s answer the first question this article poses: “Who should I approach to raise the equity capital?” There are three circles of people you can reach out to fund your deals.

Related: Creative Financing: 5 Outside-the-Box Tools Savvy Investors Use to Build Wealth

The primary circle

This circle is made up of family, friends, and acquaintances. It could be a parent, aunt, coworker, the goalie from your rec soccer team—any individual you personally know. Many real estate investors find their first funding from this circle. Why? Because there’s a low barrier of entry. Also, they are inclined to say yes because they know you and hopefully would want to partner with you.

There are, however, negative aspects of raising money from friends and family. They may not be knowledgeable enough to know the difference between a good and bad deal. Be very clear about the risks. Make sure your lender truly has enough money for the deal and could afford to lose the investment if it goes south. Otherwise, the deal may sour the relationship.

This circle can provide that essential initial source of funds—like earnest deposit money. Using money from primary circle lenders gives you time to create value by locating and locking up deals so that you can raise additional money.

The secondary circle

The secondary circle of investors is the friends and colleagues of your primary circle. The bigger your primary circle, the bigger your secondary—so get out there and make more friends and contacts through the BiggerPockets Forums and other social networking groups. Your secondary circle is, appropriately, the second-best source for raising capital. They’ll generally be receptive to listening to your proposal, given that your primary circle’s mutual contact gave the nod of approval.

But take the good with the bad: It will likely take more time to raise money since this group is less positively inclined to say yes. You’ll need to prove your worth by preparing an investment presentation and meeting investors face-to-face.

The third-party circle

This circle consists of people you don’t know personally, like investors removed from your network. This circle is the biggest capital pool that you can access, but it takes the longest to convert them into capital partners since they don’t know you personally or professionally.

Related: What Newbies Should Know About Financing Investment Properties (Versus Homes)

How to find private lenders

Start with lenders you know and their contacts—or the primary circle and secondary circle.

Spread the word

Chronicle your investment activities through social media as a credibility boost among those you already know. It consistently reminds people that you’re a real real estate investor and a professional at what you do.

Additionally, call or email people that you already work with like agents, title company reps, your CPA, and closing attorneys—and everyone in between. Chances are you already have a relationship with someone who knows someone who can help you. This method can dig up a handful of small lenders with $10,000 to $50,000 they’re looking to invest.

The hard sell

Sit down with the potential lender and present your business plan. Have a proper, professional presentation and a pro forma package for them to review. Staying businesslike ensures you’re taken seriously by any contacts who run a bit more formal. Show them why they should invest with you: What deals have you completed? What return can you provide? Show them deals you are looking at right now, too.

By showcasing your success through social media and other outlets, more individuals will come to you, asking how they can also benefit from your success. With enough experience and success, it won’t be long before you stop seeking out private money lenders—and instead, they seek out you.

Related: 4 Tips to Raise Private Money for Your Real Estate Investments

Seeking out lenders you don’t know—yet

Eventually, you might get to the point where you have two to three awesome lenders helping you complete deals left and right. But what happens if you happen to lose one—or even all three? It’s never a bad thing to forge relationships with lenders.. Before connecting with these individuals or companies, you’ll need to go out and find them. But how?

Network, network, network

Attend every local meetup you can—whether at your city’s real estate club or a BiggerPockets meetup. Also, go to your local chamber of commerce meetings and any real-estate-related conferences you can find. Put yourself out there and make sure those who previously didn’t know you get to—and want to work with you.

Public record search

If networking isn’t taking off and you don’t know anyone with money, try searching public records. Each time a mortgage is made, the related documents are publicly recorded at the local county government, found online, or in the building itself. From these documents, you can find out who the lenders are on properties.

Specifically, you are looking for the “grantee” (mortgage provider) line. You want to find grantee lines that have either a person’s name or a corporate entity name, not the name of a bank. These are potential lenders for your next deal.

Online direct mail lists

Rather than looking up every property to find the lender, try one of these data broker sites:

You can also have the lenders come to you by posting your real estate deal on the following sites:

What can you do after you have downloaded a list of names from ListSource or DirectMail.com? Reach out to them, of course!

Cold call

After creating your list of potential lenders, find their phone numbers and give them a call. A basic script you can use when cold calling looks like this:

Hello, is this John? My name is Anson, and I see you lent money for a project on 123 Main Street. My company does similar fix-up projects, and I’m calling today to see if you are looking to lend more on these types of deals.

From there, the conversation could go 100 different ways. This is a relationships game. You could build rapport by talking about projects they are working on, other investors they work with, their kids, the local sports team, or one of a dozen different things. Show them how you bring value and don’t just pitch. Lenders will be able to see through phony enthusiasm.

Direct mail marketing

If you don’t want to call, you can send letters. You want to provoke an initial reaction, get them to call you, and start building rapport. Mention the property they lent on so they know what you’re talking about—and (of course) bring it back to your current deal and that you are currently looking for new private money lenders.

Make sure to include your call to action, asking them to contact you to discuss this further. But use the contact information you find only to build a relationship. Soliciting others at random for money can be both illegal (for you) and annoying (for them).

The structure of private money deals

For buy and hold real estate investments, private money deals are structured much like a conventional bank loan. The lender puts up the full amount to buy and rehab the property, and the buyer repays the loan at an agreed-upon interest rate and amortization schedule.

These loans are usually for five years or less with balloon payments at the end. Many times, the lender agrees to refinance the loan at the end of the term because they like the stability of income.

Private lenders can also function as a second mortgage behind a primary bank lender to cover down payment or rehab costs. There are two things to remember when doing something like this:

  • Be sure your lender understands their position as a second mortgage holder.
  • Be sure your primary bank lender will allow it. (Some don’t—they want some of your skin in the game.)

For fix and flip deals with private lenders, you might negotiate a profit-sharing agreement. In these types of deals, the lender loans the entire amount to purchase and rehab the property. Then, once the property is sold, the profits are split as per your agreement.

There are no monthly payments, and the lender has no say in terms of how the property is rehabbed and listed. But, of course, keep them informed throughout the process.

In both cases, there are significant amounts of paperwork drawn up to protect every party. A proper closing is held with an attorney, and all monies are properly escrowed or exchanged.

A deed of trust is always recorded, and a promissory note outlining terms and conditions is always executed.

Can you pool private money?

Yes, you can—with many legal conditions. Laws have recently changed to allow crowdsourcing. Plus, syndications, or the combining of investor monies into an entity such as an LLC, have been utilized for decades.

That said, while pooling can be done, you need to be aware of state and federal rules. Advertising is a big no-no, for example. You can get into some real trouble if you do not report the right information or structure your dealings properly.


There you have it—all the ways to find 100 percent private money. Go out and network, promote yourself, and use any of these creative ways to seek out lenders and get some money to do some deals.

Any questions about finding private money? How do you go about doing it for your deals?

Let me know your thoughts with a comment!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.