Private Money vs. Traditional Bank Financing: Which Has Worked Better for Your Deals?

Question

For real estate investors, choosing the right financing strategy can make a significant difference in how a deal comes together.

Traditional bank loans may offer established terms and structures, while private money financing may provide different approaches to evaluating the property, deal structure, renovation plan, and exit strategy.

For those who have used both options:

• What made you choose private money instead of a traditional bank loan?
• Was financing speed a major factor, or was it more about the property's investment potential?
• How important were the ARV, renovation budget, and exit strategy in your lender's decision?
• What trade-offs did you notice in terms of interest rates, fees, flexibility, and repayment terms?
• What advice would you give an investor considering private money for the first time?

What made you choose private money instead of a traditional bank loan?

Was financing speed a major factor, or was it more about the property's investment potential?

How important were the ARV, renovation budget, and exit strategy in your lender's decision?

What trade-offs did you notice in terms of interest rates, fees, flexibility, and repayment terms?

What advice would you give an investor considering private money for the first time?

I'd love to hear about your experiences, what worked well, and what you would do differently on your next deal.

Hossein Sharifi · Answer

I compare total cost, not rate. Private at 11% + 2 points over 6 months on $200K is about $15K, and a bank at 7.5% is cheaper on paper but can't close in 10 days on a distressed property. For flips and BRRRR acquisitions, speed usually pays for itself; for long holds, refinance into bank or DSCR debt.

Divin Kanyama · Answer

@Susan Stoker Private money usually makes sense when speed, property condition, or deal flexibility matters more than obtaining the lowest rate. These lenders often focus heavily on the purchase price, ARV, renovation budget, borrower equity, and a credible exit, while banks tend to place more weight on income, documentation, and stabilized condition. The trade-off is higher interest, points, shorter terms, and less room for delays. For a first deal, underwrite the total financing cost—not just the rate—build contingency into the rehab and timeline, and have a realistic backup exit if the refinance or sale takes longer than expected. Expensive capital can still be useful, but only when the deal has enough margin to absorb it.

Private Money vs. Traditional Bank Financing: Which Has Worked Better for Your Deals?

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