Private Money Lending for New Investor

8 Reply

Steve WilsonPro Member

OP

Investor · Southeast Michigan · Member since 2024 · 23 posts · 15 votes

9mo

Thanks Chris, that’s helpful. I’m all ears to other thoughtful ways to do this as well, but I don’t necessarily want to close the door on private money lending if the numbers work and it helps me grow either.

James Mc Ree

Rental Property Investor · Malvern, PA · Member since 2016 · 1k+ posts · 936 votes

9mo

You can partner with another investor who has a downpayment. The investor provides the down payment, you get a loan and commit to doing all of the work and the investor gets something in return beyond just the % equity. You will likely be jointly owning the property, so be sure to set expectations and choose someone you can work with.

Kenneth GarrettPro Member

Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes

9mo

@Steve Wilson

There is a time and place and how you use private money. Borrowing at 100% I don’t know how you will be able to cash flow when you’re paying interest on the down payment as well as the mortgage. Private money is expensive. Typical interest rate is 12%. There is no security for the private lender at 100% financed and to be in second position on the lien. The other issue is most lenders are not going to allow you to do that.

Where people use private money is on BRRRR deals where you are rehabbing the property, forcing appreciation and refinancing the property out. This would allow you to use your down payment for partial money stuck in the deal. It's very difficult to get 100% of the money out on the refinance in today's economy.

You might be able to do 2 or 3 of these. You then take the cash flow and bank it and that reuse it the same way.

You'll need to network to find private lenders. I found mine at local REIA meetings. You can also find them on BP.

3 Reply

Steve WilsonPro Member

OP

Investor · Southeast Michigan · Member since 2024 · 23 posts · 15 votes

9mo

Awesome thanks Kenneth

[email protected]614-802-5698

Alfath AhmedBusiness Member

Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes

9mo

Quote from @Steve Wilson:

Hi everyone,

I'm getting ready to buy my first investment property in Southeast Michigan sometime in the next 2-3 months (I hope). I have enough cash on hand for a 25% down payment and closing on my first property, but looking forward, I will be limited in how quickly I can save enough capital for my next down-payment. I've looked into HELOCs and borrowing against my 403b as other creative financing options for the future, but unfortunately this won't be possible. I was speaking with a mentor who told me he was able to use private money for down payments, almost as a line of credit when he was first starting out, and this seemed to work well for him. I've been networking and chatting with folks about this, but wondering if anyone out there in the BP world happens to know any private money lenders who might be willing to work with a newbie investor? Thanks!

Steve

Are you looking to do BRRRR/value add deals in Michigan? I wouldn't just invest without having a clear direction of your goal.

People use HELOC's to buy flips or value-adds. Otherwise, you can gather 15% down or 25% down to buy a property, but it should be in a good area and provide you with very strong cashflow.

Let me know if you need guidance. I have 15% down lenders and can help guide. I've chatted with a lot of investors who invested in Michigan. So i can guide you.

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Steve WilsonPro Member

OP

Investor · Southeast Michigan · Member since 2024 · 23 posts · 15 votes

9mo

Thanks Alfath - would love to go the cosmetic BRRRR route if I can find an ideal property with some built in equity

Alfath AhmedBusiness Member
Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
9mo
Quote from @Steve Wilson:
Thanks Alfath - would love to go the cosmetic BRRRR route if I can find an ideal property with some built in equity

Okay cool. You need to find a good investor agent that can connect you with the team - lenders (hard money/dscr for refinance), contractor, and property manager (lease and manage).
Have your agent help you with the first Scope of Work. They should be able to help if they have experience as an investor.
Make sure the agent is sending you offmarket and on market deals. Good luck!
[email protected]614-802-5698
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0 Reply

Steve WilsonPro Member

OP

Investor · Southeast Michigan · Member since 2024 · 23 posts · 15 votes

9mo

Very much appreciated!

[email protected]248-209-6824

Alfath AhmedBusiness Member
Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
9mo
Quote from @Steve Wilson:
Very much appreciated!

Perfect. I dm'ed you. Let me know if you want to hop on a call. Happy to offer perspective.
[email protected]614-802-5698
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0 Reply
Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
9mo
Quote from @Alfath Ahmed:

Quote from @Steve Wilson:
Very much appreciated!

Perfect. I dm'ed you. Let me know if you want to hop on a call. Happy to offer perspective.

That's really nice of you to offer to help someone invest in Michgan!
Hope you don't try to sway them to Columbus, OH:)
[email protected]248-209-6824
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0 Reply
Alfath AhmedBusiness Member
Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
9mo
Quote from @Drew Sygit:

Quote from @Alfath Ahmed:

Quote from @Steve Wilson:
Very much appreciated!

Perfect. I dm'ed you. Let me know if you want to hop on a call. Happy to offer perspective.

That's really nice of you to offer to help someone invest in Michgan!
Hope you don't try to sway them to Columbus, OH:)

Thanks for the reminder @Drew Sygit. Now that you say it ;)
[email protected]614-802-5698
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0 Reply
Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
9mo
Quote from @Alfath Ahmed:

Quote from @Drew Sygit:

Quote from @Alfath Ahmed:

Quote from @Steve Wilson:
Very much appreciated!

Perfect. I dm'ed you. Let me know if you want to hop on a call. Happy to offer perspective.

That's really nice of you to offer to help someone invest in Michgan!
Hope you don't try to sway them to Columbus, OH:)

Thanks for the reminder @Drew Sygit. Now that you say it ;)

Funny guy:)
[email protected]248-209-6824
Logical Property Management4.9459 Reviews
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0 Reply

Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

9mo

Quote from @Steve Wilson:

Hi everyone,

I'm getting ready to buy my first investment property in Southeast Michigan sometime in the next 2-3 months (I hope). I have enough cash on hand for a 25% down payment and closing on my first property, but looking forward, I will be limited in how quickly I can save enough capital for my next down-payment. I've looked into HELOCs and borrowing against my 403b as other creative financing options for the future, but unfortunately this won't be possible. I was speaking with a mentor who told me he was able to use private money for down payments, almost as a line of credit when he was first starting out, and this seemed to work well for him. I've been networking and chatting with folks about this, but wondering if anyone out there in the BP world happens to know any private money lenders who might be willing to work with a newbie investor? Thanks!

Steve

Couple of points on your post & responses here:

PRIVATE MONEY: seems to be some confusion about what it is.!
Think about the word "private", what do you think that implies?
It is NOT institutional, so can't be FNMA, DSCR, etc.
That leaves money from private individuals you know - that believe in what you are investing in. They can be either partners or lenders.

HARD MONEY: what you may actually be looking for. The "hard" part means it's hard to invest with the high interest rates & fees these lenders charge! So, typically only used for short-term situations, like rehabs, and then the property is sold or refinanced to pay the hard money off.

COSMETIC BRRR: 95% of investors, especially newbies, want these.
So, how are you going to beat the competition to these?
Networking is one to do so.
You want to find "deals" BEFORE Realtors do! Realtors have a legal fiduciary responsibility to tell a seller the market value of their property. So, you want to lock up a property before a seller may realize what it is worth. OR you can offer a seller a quick closing for a lower price.

How are you marketing for "deals" from your network on social media?
How often are you posting?
What are you posting?

If you'd like to schedule a chat to go over all this, DM me:)

Logical Property Management4.9459 Reviews

[email protected]614-418-6081

Arman AhmedPro Member

Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 948 votes

8mo

@Steve Wilson

Hi Steve,

It sounds like you're on the right track with a cosmetic BRRRR strategy. For first-time out-of-state investors, the key is having a solid local team—lender, contractor, property manager—to handle the on-the-ground work. Networking is also critical to finding deals before they hit the market, which gives you a competitive edge. Start by targeting properties with built-in equity in strong neighborhoods, keep rehab scopes manageable, and make sure your numbers work even with conservative projections. Patience and diligence early on will help you scale effectively.

Steve WilsonPro Member

OP

Investor · Southeast Michigan · Member since 2024 · 23 posts · 15 votes

8mo

Thanks Arman!

[email protected]551-287-6884

Jake YuskaitisBusiness Member

Lender · New Jersey, USA · Member since 2022 · 254 posts · 67 votes

8mo

down payment funding is absurdly expensive. If you don't have the money for the down payment and closing costs then you don't have the money for the deal.

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Erik EstradaBusiness Member

Lender · Member since 2022 · 6k+ posts · 1k+ votes

8mo

Quote from @Steve Wilson:

Hi everyone,

I'm getting ready to buy my first investment property in Southeast Michigan sometime in the next 2-3 months (I hope). I have enough cash on hand for a 25% down payment and closing on my first property, but looking forward, I will be limited in how quickly I can save enough capital for my next down-payment. I've looked into HELOCs and borrowing against my 403b as other creative financing options for the future, but unfortunately this won't be possible. I was speaking with a mentor who told me he was able to use private money for down payments, almost as a line of credit when he was first starting out, and this seemed to work well for him. I've been networking and chatting with folks about this, but wondering if anyone out there in the BP world happens to know any private money lenders who might be willing to work with a newbie investor? Thanks!

Steve

Hey Steve! Congrats on the new venture. On the financing side, I usually see 1st time investors partner up with experienced investors to split the downpayment + closing. This will help you use less of your capital and bear less of the risk associated with real estate investing. Once you get more deals under your belt, lenders will be able to finance you with competitive terms. You will also be able to pitch private investors/lenders a JV partnership to contribute funds to your deals, without necessarily having to split your profit or being directly involved in your flips. These are some of the many ways I see deals getting done nowadays.

Best of luck!

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Andrew Zamboroski

Lender · Member since 2021 · 495 posts · 130 votes

8mo

Quote from @Steve Wilson:

Hi everyone,

I'm getting ready to buy my first investment property in Southeast Michigan sometime in the next 2-3 months (I hope). I have enough cash on hand for a 25% down payment and closing on my first property, but looking forward, I will be limited in how quickly I can save enough capital for my next down-payment. I've looked into HELOCs and borrowing against my 403b as other creative financing options for the future, but unfortunately this won't be possible. I was speaking with a mentor who told me he was able to use private money for down payments, almost as a line of credit when he was first starting out, and this seemed to work well for him. I've been networking and chatting with folks about this, but wondering if anyone out there in the BP world happens to know any private money lenders who might be willing to work with a newbie investor? Thanks!

Steve

Hi Steve,

Nice to see another person from SE Michigan! The BRRRR method is a popular strategy to stretch your cash on hand, although it does require getting solid deals like Drew mentioned. In terms of private money, you may want to consider those close to you that would be interested in a partnership. You may also find value (and investment) from other investors via some of the great real estate meetups we have available to us in Michigan.

Matthew Bernal

Investor · Austin, TX · Member since 2021 · 497 posts · 127 votes

8mo

That can happen, but it’s not very common, especially for someone new. When private money is used for down payments, it’s usually relationship-based and tied to a specific deal, not an open line of credit. Most private lenders want to see a clear plan, strong equity, and a defined exit before putting money in, and many are more cautious with first-time investors.

Out of curiosity, are you planning to buy and hold long term, or something shorter term where capital gets recycled faster?

Austin Johnson

Investor · Phoenix, AZ · Member since 2025 · 40 posts · 20 votes

8mo

Hey! Check out @Brett Synicky

Lori Conerly

Charlotte, NC · Member since 2016 · 1 post · 0 votes

8mo

[email protected]516-888-7750

Frankie VozziBusiness Member

Member since 2025 · 346 posts · 87 votes

7mo

Hi Steve, private money for down payments can work, but it’s usually relationship-based and tied to the deal strength, not just the borrower being new. For a first deal, many investors:

Use their own capital to get deal #1 done cleanly, Then leverage private money, refis, or equity to scale faster on deal #2, Focus on building credibility with one solid, well-executed project, Private lenders care most about asset quality, downside protection, and exit, even more than experience. If you structure the first deal conservatively, it becomes much easier to attract capital going forward. I sent you a DM let's connect!

Doug SmithPro Member

Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes

7mo

One thing that I see from newer investors is that they sometimes move too quickly and overleverage. I have a customer right now that quickly built a large rental portfolio, but he had one little hiccup and the house of cards is collapsing around him. He's a great guy, but he overleveraged a bit on the entire portfolio and when one thing went wrong, the dominos started to fall. Personally, I would take your time and not over-extend. I know a lot of people on here push borrowing down payment, but I've just watched too many people over 35 years implode from over-borrowing. It might not be the popular advice or what you want to hear, but it's my honest take. I wish you well in your endeavors.

Vijay FriedmanBusiness Member

Miami, FL · Member since 2026 · 766 posts · 122 votes

5mo

Quote from @Steve Wilson:

Hi everyone,

I'm getting ready to buy my first investment property in Southeast Michigan sometime in the next 2-3 months (I hope). I have enough cash on hand for a 25% down payment and closing on my first property, but looking forward, I will be limited in how quickly I can save enough capital for my next down-payment. I've looked into HELOCs and borrowing against my 403b as other creative financing options for the future, but unfortunately this won't be possible. I was speaking with a mentor who told me he was able to use private money for down payments, almost as a line of credit when he was first starting out, and this seemed to work well for him. I've been networking and chatting with folks about this, but wondering if anyone out there in the BP world happens to know any private money lenders who might be willing to work with a newbie investor? Thanks!

Steve

@Steve Wilson

For a first investment property, I’d be careful using private money just to preserve cash for the next down payment.

Private money can help with speed and flexibility, but it usually comes with higher rates, points, and shorter terms. If you already have enough for 25% down and closing costs, traditional investor financing or DSCR may be cleaner for the first deal.

I’d compare:

private money cost vs conventional/DSCR payment
how fast you plan to buy property #2
reserves after closing
whether the first property cash flows after all expenses
refinance/exit options
seasoning requirements

Private money can work, but I’d use it only if the deal margin is strong enough to justify the extra cost.

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