Your aunt says, “If you ever need money for a deal, let me know.”
Most new investors hear that and think they’ve found a lender. They haven’t. They’ve found someone who trusts them a little. What they do next determines whether that trust grows into a lending relationship — or turns into the most awkward Thanksgiving of their life.
Private money is the most flexible capital in real estate. It’s also the most personal. When someone lends you their own money, they’re betting on you. Treat it that way.
What private money really is
Private money is a loan from an individual — not a company that lends as a business — secured by real estate. The person lends their own funds (sometimes through a self-directed retirement account), you sign a promissory note, and a mortgage gets recorded against the property so the lender has a lien.
The terms are negotiated between you and the lender. That’s the flexibility. It’s also the danger, because there’s no lender’s compliance department protecting either side. You and your attorneys are the compliance department.
If you want to understand what a careful lender should demand from you, read my private money lending education site. It’s written for the lender, and every borrower should read it too.
Who actually lends private money
Forget the idea of a mysterious wealthy stranger. In my experience, private lenders tend to be:
- People who already know your character — friends, family, longtime acquaintances
- Professionals who have watched you work: people you’ve closed with, done business with, served alongside
- Retirees or business owners who want their money tied to something they can drive by
- Other investors who have more capital than time
- People with self-directed retirement accounts who want real estate exposure (with their custodian and CPA involved)
Notice the common thread. They’ve seen you before they lend to you.
How to find private money lenders the right way
Here’s the order. It’s slower than the internet promises. It also works.
Do deals first
Capital chases deal flow. Close a few properties with hard money, your own cash or a partner. Document everything. Every finished project is proof you can execute. If you haven’t done a first deal yet, start at how to get your first real estate deal.
Tell people what you do — not what you want
Talk about your work naturally. The house you just finished. The problem you solved. What you’re learning. You aren’t pitching. You’re letting people see a pattern of competence. The ones who are interested will ask.
Show up where investors are
Local investor groups, your own community, the people you already serve. In South Carolina, I point people to my guide on real estate investors in Columbia SC for ways to plug in.
When someone asks, educate before you ask
The best first conversation is about how private lending works, what the risks are, and how a lender protects themselves. Not a pitch. If they’re still interested after hearing the risks, you’ve found someone worth working with.
How to present a deal to a private lender
When a lender is ready to look at a specific loan, give them a clean package. One property. One loan. Everything they need to make their own decision.
- The property: address, photos, condition, the purchase contract
- Your valuation: sold comps and how you reached your after-repair value
- Your scope of work and contractor bid, plus your contingency
- Your exit plan and your backup exit
- Your timeline, with realistic slack built in
- Proposed loan structure, drafted for their attorney to review
- Proof of insurance plan, naming the lender as mortgagee
- Your track record in plain words — what you’ve completed, what went wrong, what you learned
Then tell them to take it to their own attorney or advisor. A lender who reviews documents with counsel is a lender who’ll still trust you in three years.
The paperwork: attorney, always
Private money deals should be documented like any institutional loan, sometimes better. At a minimum, I’d expect:
- A promissory note, drafted by a real estate attorney, spelling out the loan and what happens on default
- A mortgage recorded in the county where the property sits — that’s what secures the loan in South Carolina
- Lender’s title insurance so the lender knows their lien position
- Hazard insurance naming the lender as mortgagee
- A closing attorney handling funds, title and recording
If you’re tempted to do it on a handshake because it’s family — don’t. Paperwork is how you protect relationships, not how you insult them.
The securities caveat you can’t ignore
This is the part most “raise private money” content skips.
Borrowing from one person, on one property, secured by a recorded mortgage on that property, is one thing. Pooling money from many people into a fund, promising them a share of results, or advertising publicly for lenders is something else entirely. That can implicate federal and state securities laws, with real consequences.
If you find yourself raising from more than one or two people, or using any kind of advertising to attract capital, stop and talk to a securities attorney before you take another dollar. I’m an investor, not a lawyer, and I won’t tell you where the line is. Your attorney will.
How private money fits with everything else
Private money doesn’t replace other funding. It sits alongside it. Plenty of investors use hard money loans for their first projects, build a track record, and only then start private money relationships. Others bring a capital partner into a written real estate joint venture instead of borrowing at all.
If you’re in the Midlands, my local guides cover how investors put deals together in places like Lexington SC and Irmo SC. For the full picture, go back to how to fund real estate deals.
Your next step
Do the next deal well. Document it. Tell the story honestly. Private money finds people who are already performing.
If you want help sharpening your deal package before you show it to anyone, bring it to REI Skool. It’s free, and the community will tell you where your numbers are thin before a lender does.
Questions people ask
Where do most investors find private money lenders?
Usually inside relationships they already have: people who’ve watched them work for years, professionals they’ve done business with, and contacts from local investor communities. Private lenders rarely come from cold pitches. They come from people who see you execute over time.
Do I need an attorney to borrow private money?
Yes, use one. A real estate attorney should draft the promissory note and the mortgage, and a closing attorney should handle title and recording. In South Carolina, closings are attorney-supervised anyway. Good paperwork protects both you and the lender.
Can raising private money be a securities issue?
It can be. Borrowing from one person on one property, secured by that property, is very different from pooling money from many people or advertising for investors. Pooling and public solicitation can implicate federal and state securities laws. Talk to a securities attorney before you raise from more than one or two people.