Private Money

Private money is real estate financing lent by individuals — friends, family, or other investors — rather than a bank or a hard money company.

Private money is real estate funding that comes from individuals — a retired professional, a family friend, another investor with idle capital — rather than a bank or a hard money company. Terms are whatever the two parties negotiate: rate, term, payment schedule, and collateral are all on the table. A proper private money loan is still a real loan, documented with a promissory note and secured by a recorded mortgage or deed of trust, so the lender has a claim on the property if payments stop.

A typical arrangement: an investor finds a rental to buy at $90,000 and borrows $100,000 from a private lender at 8% interest-only for twelve months — enough to cover the purchase and part of the rehab. The lender earns a far better return than a savings account, secured by real property; the investor gets speed and flexibility no bank offers. Long-running private lending relationships are how many full-time investors fund every deal they do.

What beginners get wrong: chasing money before they have a deal, and treating the paperwork casually because the lender is a friend. Handshake loans destroy relationships when a deal goes sideways. Use a real note, record the security instrument, close through a title company or attorney, and be aware that raising money from multiple people can cross into securities regulation — get proper guidance first. This is not legal or investment advice.