How to Find Private Money Lenders (and What to Offer Them)
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Key takeaways
- Three sources: institutional hard money lenders, individual private lenders in your network, and brokers/marketplaces.
- Individuals lend on trust plus collateral; expect 8–12% and 0–2 points with negotiable terms.
- Protect both sides with a promissory note, recorded deed of trust, lender’s title policy and insurance naming the lender.
- Securities laws matter: pooling multiple investors into one fund is regulated — one lender per deal is the simple path.
Where private money comes from
“Private lender” covers three very different sources. Institutional hard money lenders — the companies in our directory — have published programs and fund from warehouse lines or investor capital. Individual private lenders are people with cash, self-directed IRAs or home equity who want a secured return above what bonds pay. Brokers and marketplaces connect borrowers to either. Most investors start with institutional lenders because they are predictable, then build relationships with individuals for cheaper, more flexible capital.
Finding individual private lenders
- Your own network first. Retired professionals, business owners, doctors and dentists, and anyone with a self-directed IRA. A 9–10% first-position return on a property they can drive by is compelling to people earning 4–5% elsewhere.
- Local REIA meetings and landlord associations. Established investors who have transitioned to lending attend these specifically to deploy capital.
- Public records. County recorder data shows who holds deeds of trust on recently flipped properties — those are active private lenders in your market. Title companies and real estate attorneys know them too.
- Self-directed IRA custodians run education events for account holders looking for private notes.
- Online directories and forums (BiggerPockets, Connected Investors, Private Lender Link) list both individuals and small funds.
- Referrals from your hard money lender — many will introduce you to their own capital partners once you have performed.
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What to show a private lender
A one-page deal summary: property and photos, purchase price, rehab budget, ARV with comps, timeline, your experience, and the proposed terms — loan amount, LTV, rate, points, term, position (first lien), and exit. Follow with your track record sheet and a sample closing package. Individuals are investing in you as much as the property; organized, conservative borrowers raise money repeatedly.
Typical private-money terms
- Rate: 8–12%, often paid monthly; some lenders accept accrued interest paid at exit.
- Points: 0–2.
- Leverage: 65–75% of ARV; many individuals prefer 60–65%.
- Term: 6–12 months with a pre-agreed extension.
- Position: first lien only for most individuals; seconds at higher rates for a few.
- Draws: often simpler — a few fixed stages with photo verification.
Protecting both sides
Use a real estate attorney in the property's state. The minimum package is a promissory note, a recorded mortgage or deed of trust, a lender's title insurance policy, a hazard/builder's risk policy naming the lender as mortgagee, and loan servicing by a third party or at least a documented payment ledger. Fund through escrow, never directly between parties. If the lender is using an IRA, the custodian will have its own documents and the note must be payable to the custodian for the IRA's benefit.
The securities-law line
One lender, one deal, secured by a specific property is a loan. Pooling several investors' money into a fund or LLC that then lends is typically a securities offering requiring exemption filings (Reg D) and compliance. Keep it simple until you have counsel and scale.