How has private money lending worked for your real estate investing strategy?

Question

For investors who have used private money, what factors made you choose private financing instead of a traditional bank or other financing option?

Was it primarily:

• Speed of financing• More flexible deal structures• Property-focused underwriting• A time-sensitive acquisition• Difficulty qualifying through traditional financing• The ability to structure the deal around a specific investment opportunity

For those who have experience with private lenders, what has been the biggest advantage—and what should newer investors be aware of before choosing this type of financing?

I'd be interested to hear what has worked well for other investors and what lessons you've learned.

Erik Estrada · Answer

Hi Susan,

For those who have experience with private lenders, what has been the biggest advantage—and what should newer investors be aware of before choosing this type of financing?

-- The biggest advantage is speed and flexibility. Private lenders are the gap between institutional lending & non-traditional lending. There is less paperwork and a lot more flexibility in financing unique properties, entities, and scenarios.

James Jones · Answer

For me, private money is a bridge, not a strategy.

I buy under $100K in Memphis, rehab $30-40K, ARV $180K-$265K. I use short-term money to acquire and rehab fast, then refi into DSCR at 70-80% LTV once it's stabilized and rented. The private money gets paid back at the refi.

I choose private money when speed matters — wholesaler deals don't wait for bank underwriting. I never put earnest money down, so I need to close fast when I commit. The higher rate is fine because I'm only in it for 3-6 months.

The key: know your takeout before you borrow. If the DSCR refi doesn't work at 70-80% LTV, I don't do the deal.

Divin Kanyama · Answer

@Susan Stoker Private money is usually most valuable when the opportunity does not fit a bank’s timeline or underwriting box. Speed and flexibility can help with auction purchases, distressed properties, short closings, or deals where the investor’s plan matters more than the property’s current condition.

The biggest advantage is certainty of execution—the ability to structure funding around a specific deal rather than force the deal into a standard loan product. That flexibility can justify the higher cost when it creates enough additional value.

Newer investors should look beyond the interest rate and understand points, fees, default provisions, extension costs, collateral, personal guarantees, and the lender’s remedies. Most importantly, have a realistic exit strategy before borrowing. Private money is helpful when it solves a temporary financing problem; it becomes dangerous when the plan depends on a perfect refinance, sale, or renovation timeline.

Susan Stoker · Answer

Private Money Lenders move faster and have less restrictions. They have many options for different types of loans. In my case I am able to also offer joint ventures with investors which allows 100% financing. I am partners with several lenders and can provide GAP Funding which has significantly helped newer investors who may not have the initial capital needed to make the deal work. The rates and the terms, for new investors know your rates and terms. Some lenders may give great rates but terms may not be exactly what you want. Be sure to always choose what is going to work best for you. Decide what is most important to you and your deal the rate or the terms. Lenders try to give the best rates and terms but just always be mindful of what is being offered.

How has private money lending worked for your real estate investing strategy?

How has private money lending worked for your real estate investing strategy?

Most Popular Reply

4 Replies