Setting Expectations: What Private Lending Really Looks Like

Setting Expectations: What Private Lending Really Looks Like

Private lending in real estate is often marketed as a passive, high-yield opportunity—and it is. But success comes from understanding what to expect and how the process actually works. If you're considering becoming a private lender, here's what you should realistically prepare for.

You’re the Bank—But With a Partner

As a private lender, you're not buying the property or managing it. Instead, you’re providing funding to a real estate investor or operator, who uses your money to acquire or improve a property. In exchange, you receive consistent interest payments—typically ranging from 8% to 12% annually—secured by the property.

You’re not a landlord or a flipper. You’re the bank. That means you have less work, but you also need to trust your borrower and ensure the deal is protected.

Documentation and Due Diligence Matter

Expect to sign a promissory note and have your loan secured by a mortgage or deed of trust. You should also be listed as an additional insured on the property’s insurance policy.

Before funding a loan, review the borrower’s track record, the deal specifics, the property value, and the exit strategy. A reputable investor will provide all of this transparently.

Consistent Payments, But Not Risk-Free

Most deals offer monthly interest-only payments, giving you steady cash flow. But remember—this is still an investment. Risks exist. The borrower could default, or the market could shift. That’s why the collateral and legal structure are so critical.

Private lending can be a safe, passive, and rewarding strategy—if done right. With proper expectations and a good lending partner, you can earn strong returns while helping others achieve their real estate goals.

Would you like to know more about investing passively from your IRA?   Contact Alex at [email protected] or call 501-580-2598

What we’re up to…

In my last newsletter, I mentioned that I had started my real estate agent course. While I still have some ground to cover before I take the exam and get licensed, I’ve already partnered with a trusted real estate agent friend—and I’m excited to share that we’ve got my first listing under contract!

Now comes the real challenge: getting it sold! Stay tuned for updates.

Would you like to know more about how to grow your retirement nest egg? Contact Alex at [email protected] or call 501-580-2598