What is Private Lender?
A private lender is a non-institutional individual or small company that lends money on real estate deals — typically friends, family, or local high-net-worth individuals deploying their own capital. Less regulated and more flexible than hard money or institutional lenders.
Private lenders are the financing layer that lets growing operators escape the cost of hard money. A private lender lending $200,000 at 8% interest interest-only earns $16,000/year on capital that would earn maybe 4-5% in bonds — both sides win.
Building a private-lender network takes time and trust. The path is typically: do your first 1-3 deals on your own money or hard money, document everything (numbers, photos, before-and-after), then present results to local investors at REIAs, country club connections, or family networks. Trust accumulates with track record.
Standard private-loan structure: 8-10% interest, interest-only payments, 12-month note with optional 6-month extension, secured by first lien on the property. Always papered with attorney-drafted promissory note and recorded deed of trust or mortgage — never on a handshake, even with family.
Concepts that connect.
A hard-money loan is a short-term, asset-based loan used by investors to acquire and renovate properties — typically 6-18 month terms at 9-13% interest with 2-4 origination points. Used when conventional financing doesn't fit (speed, condition, or borrower qualification).
Flipping is the strategy of buying a distressed property, renovating it to retail standard, and reselling at full market value within 4-9 months. Profit comes from the spread between all-in cost (purchase + rehab + carry + closing) and net sale proceeds.
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