Private Money
Loans from individual private investors — usually friends, family, or high-net-worth individuals — secured by real property.
Definition
Private money is capital lent by individual private investors — not banks, institutional lenders, or hard money companies — secured by a mortgage or deed of trust against the property. Sources include high-net-worth individuals, self-directed IRA investors, family members, and professional contacts.
Private money is typically cheaper than hard money (7–12% vs. 9–14%), more flexible on terms, and can be structured however the two parties agree. It's relationship-based lending — the lender trusts the borrower's track record and judgment.
Building a private money network is a force multiplier for serious investors. An investor with strong deal flow but limited capital can scale significantly by bringing in private lenders who earn returns backed by real estate collateral. Raising private money requires a track record, a clear pitch, and solid documentation (including a promissory note and mortgage).
Related Terms
Hard Money Loan
Short-term, asset-based loans from private lenders — used for acquisitions and rehabs when speed matters.
Gap Funding
Private capital used to cover the difference between a primary loan and the total funds needed for a deal.
Joint Venture (JV)
A business arrangement where two or more parties pool resources to complete a real estate deal.
Bridge Loan
Short-term financing that bridges the gap between purchasing a property and securing permanent financing.
Note (Promissory Note)
A written promise to repay a loan — the legal document that evidences the debt in real estate financing.
Also in "P"
PITI
Principal, Interest, Taxes, and Insurance — the four components of a monthly mortgage payment.
Points (Origination Points)
Upfront fees paid to a lender, equal to 1% of the loan amount per point.
Pro Forma
A financial projection document showing expected income, expenses, and returns for an investment property.