Private Money Lending is a Perfect Alternative to Active Investing. Here’s Why

Private Money Lending is a Perfect Alternative to Active Investing. Here’s Why


Undoubtedly, active real estate investors have heard about raising private money for real estate projects. Blogs, podcasts, books, and other media share tactics to successfully find this capital and have it fund your real estate investments using other people’s money (OPM).

This magical pool of private capital is much like a secret society with no storefronts, no advertising, and no easy way to search for these lucrative sources of OPM to help you fund your next project. However, what isn’t discussed as often is how to “be the bank” as a private money lender, an often-overlooked source of passive income in real estate. You might be surprised by how easily private money lending can fit into your investing goals and lifestyle.

Most assume private money lending is a niche market reserved for retirement plans and older retired people with millions in loose change. However, private money lending—the act of being the “other” person in other people’s money—is actually a diversification strategy employed by experienced and novice real estate investors alike. There are a few scenarios we commonly see for active investors who are also private lenders, all of which fit nicely into an existing real estate portfolio.

Lend Private Money Instead of Flipping Yourself

The first scenario we will cover is flipping. This flashy HGTV style of investing often involves a lot of time and capital to acquire and renovate a property. As the market changes or possible life events require an active flipper to pause for a period of time, flippers often utilize private money lending to earn some interest income while they take a break between projects.

This capital, which otherwise might sit in a low-interest savings account, is instead used to help fund another investor’s flip project. Flipping will always be an active income source, but why not take a break and earn some passive cash flow by becoming a lender on a project instead? Similarly, an active investor may use a retirement account to fund other investor projects since they cannot lend the money to themselves. Borrowers pay interest to your future self in that case!

As an active flipper grows, they may choose to “graduate” from such a time-consuming activity as flipping altogether and pursue more passive income routes. Private money lending can be one of those strategies! The lack of strict time commitments attracts these maturing active flippers as they search for more relaxed cashflow approaches. As an active flipper, you might be under very tight deadlines, dealing with contractors at the job site, difficulty getting materials, or even finding more problems with the project than initially thought.

A phone call can come in anytime with a potential (and sometimes literal) fire to be put out. In private money lending, rarely is there an emergency moment that must be addressed immediately. This allows an active investor to regain the one asset no one can buy more of: time. When active investors start transitioning to private lending, they still underwrite the project the way they would if they were to purchase the flip themselves. The bonus this time is that they get to sit back and watch the interest income stream in monthly without the hassle of dealing with project budgets, sub-contractors, and supply chain issues.


  1. avatar
    Cheapest eBooks Store says:

    Hi there, I discovered your blog via Google even as looking for
    a similar topic, your site came up, it appears great.
    I have bookmarked it in my google bookmarks.

    Hello there, just was alert to your weblog via Google, and found that it is really informative.
    I’m going to be careful for brussels. I’ll be
    grateful if you continue this in future. Lots of people might be benefited from your writing.


  2. avatar
    Beauty Fashion says:

    It’s appropriate time to make some plans for the future and it’s time to be happy. I have learn this post and if I could I want to counsel you few interesting issues or advice. Perhaps you can write next articles regarding this article. I wish to learn more things approximately it!

  3. avatar
    Hairstyles says:

    Just want to say your article is as astonishing. The clarity in your post is just excellent and i could assume you’re an expert on this subject. Well with your permission let me to grab your feed to keep up to date with forthcoming post. Thanks a million and please keep up the gratifying work.

  4. avatar
    Hairstyles says:

    I am extremely impressed with your writing skills and also with the layout on your weblog. Is this a paid theme or did you modify it yourself? Anyway keep up the nice quality writing, it抯 rare to see a great blog like this one nowadays..

  5. avatar
    Hairstyles says:

    You could certainly see your expertise in the work you write. The world hopes for even more passionate writers like you who are not afraid to say how they believe. Always follow your heart.

  6. avatar
    Hairstyles says:

    I have been exploring for a little bit for any high-quality articles or blog posts in this sort of house . Exploring in Yahoo I ultimately stumbled upon this site. Reading this information So i am happy to show that I’ve a very good uncanny feeling I found out exactly what I needed. I most without a doubt will make certain to do not fail to remember this site and give it a look on a constant basis.

  7. avatar
    Beauty Fashion says:

    By my research, shopping for gadgets online can for sure be expensive, nonetheless there are some tips that you can use to acquire the best deals. There are generally ways to locate discount discounts that could make one to have the best electronic products products at the cheapest prices. Thanks for your blog post.

  8. avatar
    Fashion Styles says:

    This design is wicked! You most certainly know how to keep a reader amused. Between your wit and your videos, I was almost moved to start my own blog (well, almost…HaHa!) Great job. I really loved what you had to say, and more than that, how you presented it. Too cool!

Leave a Reply

Your email address will not be published.