Personal Share – Part 3 – Private Lenders

Click Here for Part 1

Click Here for Part 2

By now my son is extremely excited about the opportunities within the business and the potential profits

Funding the deals is his big hurdle. I told him to interview Hard Money Lenders as the source of the majority of the total financing needed and for the balance use private lenders.

Who are Private Lenders & Where do you find them?

Private Lenders are every day individuals who have their money tucked is a low yield vehicle like a CD, Money Market, bank account, an IRA, or anything else similar.

They have never thought about real estate loans and they don’t even have a process. It is up to you to present a program that makes sense.

5 Things Potential Private Lenders Need to Know

  1. You are offering a great interest rate on their money
  2. Their loans are secured by real estate with at least 25% equity to spare
  3. Safeguards exist to protect their loan
  4. They can use their IRA funds with no tax or penalties from the IRS
  5. They can loan as little as $10,000.


I’ll talk more about each of these in a minute…

Let me first answer the obvious question: Where do you find these private lenders? Is there a list somewhere?

There are lists of “Private Lenders”. In fact, there is even an ad for one of my website. What you’ll discover with these lists though is that while they are private individuals, they act more like hard money lenders loaning to anyone.

True private lenders are just that – private. They loan to you and only to you because they are not in the lending business and are only making real estate loans because they trust you and what you offer.

My advice is…get the word out. Talk to everyone you know, are acquainted with, and meet and tell them that you are a real estate investor and when they start asking questions about how banks loan on these properties – tell them that you use Private Lenders.

They’ll ask you what that is and that will be your opening to discuss it more.

I’m always talking about real estate and I always let people know that I am looking for private lenders and if they know of someone who would like to earn 8-10% interest on their loans secured by real estate to please refer them to me.

And it is true – I am always looking for new Private Lenders . Often that very person is interested and then I discuss how the program works and how they are protected.

As a borrower, you must commit to the idea that nothing is more important than the security of your lenders’ money.

Let’s return to those 5 concepts that every Private Lender needs to learn.

  1. Interest: Typically potential private lenders are earning less than 1% up to 2% on their funds. You are going to offer 8-10% interest.
  2. Loan-to-Value (LTV): Loans do not exceed 75% LTV, so there is always 25% equity to protect their interests.
  3. Safeguards: Their money must be protected at all costs.
    • Their loans will not be handed directly to you. It will go through a closing agent’s escrow account and not released until all of the appropriate paperwork had been executed.
    • They will be given a Lender’s Title Policy and listed on the hazard insurance so they are paid if anything happens
    • You will provide them with an Executive Summary of each project that they can review before agreeing to any loan.
    • When the property is sold, the funds will be returned to them until they approve the next project and the cycle begins again.
    • Every project has been thoroughly research to know the market and pricing to ensure that the property will sell quickly.
  4. IRA Funds: Most people are not aware that the IRS allows individuals to rollover their IRA into a Self Directed IRA from which they can make real estate loans without paying any taxes or penalties. While the process is simple, I recommend helping your private lenders get that set up.
  5. Small loans: I recommend that you allow small loans like I do. I will accept loans as small as $10,000. Potential lenders may mistakenly believe they need hundreds of thousands of dollars to be a lender. They don’t! And many will feel safer starting small, so this gives them the opportunity to experience the process without feeling they are risking it all.

Like I advised my own son, start cultivating your private lender portfolio and treat each lender like GOLD because they are critical to the profitability of your business.

I hope this short series has helped you realize the full potential of the real estate investing business. I have been in it for 20 years and I would not trade the experience.

Whether you are just starting out, done a few houses, or ready to really expand, I would like to help.

I am looking for 2 people that I will work with one-on-one developing their business over the next year.

If you are a hard worker, don’t have stars in your eyes, but can see the opportunity in real estate investing, then let’s talk.

Click Here Now

or just write to me and let me know you’re interested. My email is


Expect abundance.

Lou Castillo


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