How to Structure Private Money Loans

There are two primary ways that private money loans are structured… as an equity or debt investment.

Private Money Loan Structuring – Equity vs. Debt

With an equity investment, you’re giving your private lender a portion of the ownership in the property. What portion? It’s up to you. But, I’ll give you an example from one of our students below.

With a debt investment, your private lender is paid a specific rate of return. This is how I’ve structured most of my private money loans. Why? Because most of the time, it’s more profitable. And by retaining 100% ownership of the property, you remain in full control.

Neither structure is right or wrong… just different.

How PMBP Student Justin Wilmot Structures Loans

Justin Wilmot, one of our students kicking serious butt in the Florida market (he’s done more than a dozen deals in the last year since getting started), structures all of his deals straight 50/50 partnership with his private lender.

So, he chose the equity investment route.

… and he never has to worry about financing again.

He brought in one private lender with deep pockets and started doing deal splits. It worked out great for him and his lender so they decided to go into business together.

With cash to close deals at Justin’s disposal, he simply focuses on finding and closing great deals.

How PMBP Student Rob Russell Structures Loans

Rob Russell, one of our Platinum students in Oregon, structures his loans completely different. He chose to go the debt route.

He offers anywhere from 5 to 10% interest per annum and consistently gets private money on the low end of that range. Whoohoo!

Rob shared a cool story about a “Loaded Dentist” recently who contacted him through his PMBP website. After chatting a couple times and meeting, he had a commitment for private money at 7% per annum… no fees, no points, no hoops, no B.S.

Also, you may be wondering…

How Does Your Private Money Lender Get Paid?

It’s negotiable.

Do whatever makes sense based on your deals, your business model.

If you’re doing long term private loans (anything over a year), maybe you distribute the interest earned or profits over time… through monthly, quarterly, or annual distributions.

For short term loans, you could let it accrue until you cash it out.

It’s up to you to determine.

Got a comment or question?

Toss it into the comment area… let us know how we can help.

– Patrick

P.S. – In our full Private Money Blueprint system, module 4 is called The Nuts and Bolts: The Essentials and Specific Steps to Every Private Money Transaction. We cover – step by step – exactly how to close a transaction and give you all the paperwork… and that’s just one small component of our overall private money getting system.