Getting Started in Private Lending—What’s the Lowest Amount You Started With?

Question

I’m looking to break into private lending at some and would love to hear from those who’ve already started. I know some people start with deep pockets, but I’m curious—what’s the lowest amount you’ve successfully used to get started?

I’m considering lending out my own capital initially before scaling up, possibly through a structured fund or syndication model. But I want to be realistic about where to begin. If you started small, what strategies did you use to grow? Did you focus on short-term loans, real estate deals, or business lending?

Appreciate any insights!

Steve Hiltabiddle · Answer

@Steve Chaparro Take your time and get educated.   There are some good resources that can help. Seek them out, read the many many posts on BP in this section.

Also, I can't speak more highly on the posts made by @Jeff S. I have found he provides no-nonsense guidance on this topic.

Again, be patient and learn.  As a Lender, you have the most capital and risk in any deal.  To minimize that financial risk you need solid docs, borrowers, properties, deals and markets or you'll be out of business in no time.

Best of luck,

Jeff S. · Answer

Our first loan was in Palmdale for $78k. It was a first-position purchase money loan, which is the only type you should consider, @Steve Chaparro. The bad news is that this was in 2010, and prices have risen just a little. 😊

As of early 2025, the median price in Palmdale ranges from the mid to high $400,000s. Similarly, you could consider lending in the Inland Empire, but the median price there falls between $400,000 and $600,000 (Riverside or San Bernardino Counties). If those prices aren’t out of the question for you, Los Angeles is even worse—nearly $1 million, which I still find astonishing.

The better news is that you will likely be lending on flips rather than consumer-ready homes. A skilled house flipper should pay no more than around 60% of these prices. Therefore, the minimum loan you’d likely make would be around $250,000.

If you are not an accredited investor (which I assume since you asked), you might consider a fund that does not require accreditation. @Scott Trench wrote an excellent blog on selecting a fund, including the pros and cons you should consider: Debt Fund Investing 101.

Alternatively, many brokers arrange fractionalized loans in California. This is a middle ground between a fund and a whole loan, and there are some restrictions. In this case, you would lend with up to 10 others on a property, with your name on the deed of trust. Few states allow this, but California does.

If you’re able to make a whole loan on your own, there are a few rules we strictly follow:

• Don’t lend to anyone you haven’t previously met and gotten to know over lunch once or twice.
• Don’t lend on any property you haven’t personally walked through.
• This means never lending far from home—you could end up owning the property.
• Understand licensing and usury laws in California. This means having a discussion with a lending attorney and using a California-licensed DRE broker to originate your loans.
• Unless it’s a fractionalized loan, only make first-position purchase money loans to experienced flippers. Experienced flippers know how to find their own rehab money.
• Avoid high-risk lending—Gator lending, EMD loans, unsecured loans, etc., are for fools.  Second-position loans are only for those who specialize in them.
• Avoid all the DMs you will now receive from out-of-state borrowers who know your funds are limited.

Jeff Wills · Answer

I would say to get started, you need to have roughly the amount of your Average median home price in your area, but should only ever loan to 70% LTV. This will ensure you avoid all but the absolute worst downturn in an area. If the market drops 30% overall, we have much bigger problems most likley. I have been learning from the group in my office for over 10 years now, and they have been in business for 12+.

Take your time, start small, and be diligent in picking the right first few deals. Once you have a proven system, raising capital should be fairly easy to get others on board. Only do Asset based lending with ownership in an LLC, this will help you avoid any homestead laws that will drag out a potential foreclosure. When you foreclose on an LLC, the courts and system have far less sympathy than a owner occupied.

My funding partner has amassed over $100M in AUM currently and growing, with an average LTV around 55% and with over 800 loans fewer than 10 have defaulted to my knowledge, and even then the investor made out handsomely due to low LTV and default interest rates. YTD they have paid out over $2M to their investors while closing about $20M in loans.

Being reliable is the biggest asset you can have, never accept a deal unless you are sure you can fund it. Over time, you will have people beating down your door.

Mike Klarman · Answer

So, it depends really.  It depends on who you are lending to.  If you are lending to some investor that is buying at/on market, they better know what they are doing cause I doubt you really want to inherit a rehab project if you take the house.  In my experience, most investors put the cart before the horse and they are not ready, nor are they aware of what lies ahead and they can easily go bust.

Then there's a different way to lay the money out, there's professional BRRRR/Flip investors who are set up very well in certain markets.  They have property sourcing, Hard Money Lending, long sub contractor lists, and a few exit agents.

You ask why they would need you if they have Hard Money Lending.  You will lend them let's say 200k at 12% and maybe 2 points origination.  They pay you 2k per month and 4k in origination.  So the debt costs them 28k/yr.

What do they do with your money?  They buy for cash at like 60% - 70% market price.  Let's say they get a steal on a cash buy for 90k, this house all day is worth 120k as-is but they get it as-is no inspection for 90k at auction/short-sale/foreclosure/direct from seller.  At an Auction in pittsburgh I say a 5/2 house go for 35k.  It needed 100k in work cause it needed everything, but the ARV was 330k cause of the school district it was in.

So now that they bought the house in cash they have the deed and now they go to their HML.  Their HML will do a delayed purchase and cash them out 85% of the 90k and also supply the 80k in rehab.  So the investor just got 75k or the 90k back and they now have this 155k HM loan.  They do the work in two months - three months.  Then they put it up for sale and they are always ahead of the curve because of the steep discount on purchase. The house will go for 290k or so.  They will pay off the 155k Hard Money loan, pay 15k in RE commissions and exit closing costs,  recoup the 15k laid out, and what's left is gross profit: 105k.  They can service the entire debt for the year and then repeat the process two more times.

If you ask me what situation I'd rather lend to?  The 2nd all day.  I'm not even sure the investor in scenario 1 even knows what to do with the money.  The 2nd investor has his whole network up and running.  Been through it before.  Understands the process and what it takes.

Amir Khan · Answer

@Steve Chaparro the lowest you can start with is $30K (one SFH with 1st lien position). Also I teach courses for new PMLs how to get into private money lending. Please check your DM..

Jonathan Chan · Answer

There are deals where you can put in as little as 10K. CHeckout a website called fractional.

Getting Started in Private Lending—What’s the Lowest Amount You Started With?

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