EP037: How Do You Structure Private Money Loans?

Have you ever considered structuring a private money loan? Have you ever wondered which types of accounts qualify for lending, or what terms are negotiable? Whether you’re looking to acquire private funds, or want to lend out to fellow investors, private lending in real estate can have incredible benefits.

On this episode of Investing in Real Estate, Natali and I are sharing our experience structuring private money loans for real estate. We’ll explain the two different deals we’ve arranged from self-directed IRAs, explain the flexibility that exists within private lending, and shed light on how to make a private deal as safe and efficient as possible.  

More About This Show
Recently, Natali and I decided to use a self-directed IRA in order to engage in a private lending transaction. We’ve discovered there is a lot of flexibility, as well as the ability to negotiate within a private note. However it’s not a simple process. Unlike taking a loan from a 401k, withdrawing from an IRA cannot happen within a few clicks of the mouse.

Unless you understand the process, loaning through an IRA can be confusing and complicated. You’ll want to join forces with a qualified real estate lawyer or closing agent who is able to meticulously review the fine print. After that, the IRA company must approve the loan. Not to mention, there is an exact science that goes into depositing into an IRA.

If this sounds like a lot of work to you, you’re right; private lending can be complicated. There can be a lot of hoops to jump through, and there is no instant gratification. However, nothing worth doing is easy, especially in business.

It certainly takes effort to begin an investing business, form an LLC, and set up bank accounts. Time and effort spent setting up a private deal can really pay off; private lending is a mutually beneficial situation.

Unlike traditional bank loans, a private loan can be constructed under a variety of terms. The lender and borrower are able to negotiate the interest rate, length of term, and payment schedule. This allows for more freedom, and the flexibility to decide upon terms that fulfill each party’s needs.

Many real estate investors search for private money for a multitude of reasons; perhaps they don’t qualify for traditional financing, are low on cash, or simply want to customize their wealth building strategy. For a private lender, lending out of an IRA, money market, or other traditional finance account can be incredibly beneficial. A private deal can yield much higher interest rates than what the stock market earns.

On today’s show, we are sharing the exact terms of two of our private loans. We’ll also discuss how to decide if a private lending transaction is appropriate, and elaborate on the roles of real estate lawyers and title companies. If you have additional questions about this topic, or anything else related to investing, ask us on Facebook!

If you're ready to take the first actionable step toward building a passive income,

We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family.  

private lending in real estate can have incredible benefits. How to structure private money loans for real estate investing.

On this episode you’ll learn:

  • What are the two steps you should take when considering constructing a private deal?
  • How do you know if you can lend out of your IRA?
  • Is it safe to lend to friends and family?
  • What are the benefits of lending out of a self-directed IRA?
  • What is the value of a loan-servicing company?
  • And much more about buy and hold investing!

Episode Resources
Me vs. Dave Ramsey by Natali Morris
Bankrate’s Loan Calculator
Equity Trust
Robert Shemin on Investing in Real Estate: Part 1 & Part 2
Tom Wheelwright on Investing in Real Estate: Part 1 & Part 2
Susan Lassiter-Lyons on Investing in Real Estate
Find Your Financial Freedom Number
Like Morris Invest on Facebook