What is Private Money & How Can I Use It To Grow My Portfolio? (Video)

There are entire books written about securing private lending for your deals but I’m going to go ahead and give you the look from a high-level. It’s important that you know what Private Money is, that it’s available to you, and that I can help you grow your real estate business significantly. 

How To Raise Private Capital for Your Development Projects | Debt vs Equity

Who are PMLS?
Private lenders are simply individuals that can provide capital to help you fund your real estate purchase. The private lender in the beginning of your career is typically somebody you know like a friend or family member. As your portfolio grows you people start to hear about what you’re doing and money becomes more available to you. The key is to get started.

Private lenders are also known as Debt Partners or Equity Partners and can sometimes be both in the same deal.

What are equity Partners?

An equity partner somebody who participates in the deal’s performance whether good or bad. For example, an equity partner may put in $50,000 worth of funding and have an ownership of 20% of the property. If the property is performing well in the managing partner decides to do a distribution of $1000… $200 or 20% will be distributed to the equity partner. If the property is sold for a 100,000 profit, the equity partner would be refunded their initial 50,000 investment + a 20,000 (20%) portion of the capital gains. On the other hand if the property performs really poorly it is sold for $10,000 loss, that same partner would lose $2000 of their initial startup capital (20% of the total loss).

What are a debt Partners?

A debt partner works more like a bank or lender. A debt partner may agree to lend $50,000 to help your purchase funding, but in this particular situation they are not participating in the performance of the deal. The debt partner is due an interest payment typically monthly or at the end of the contract. For example, let’s say the same $50,000 from above is now debt and it was agreed that the money would be lent at 12% (interest only) paid monthly. Every month you with owe your debt partner 500 bucks in interest. In this situation the principal balance of $50,000 would be paid off at the end of the loan. This amount will be paid off through a debt consolidation or refinance of the property.