Model private money loan terms: interest-only, amortizing, or equity-share structures. Compare total cost to hard money for real estate investing.
Private money is capital borrowed from individual investors — friends, family, colleagues, or private lenders — rather than institutions. It's one of the most flexible and often cheapest sources of capital for real estate investing, but structuring the terms correctly is critical for both the borrower and the lender.
This calculator models three common private money structures: interest-only (borrower pays monthly interest with a balloon payment at maturity), fully amortizing (equal monthly payments like a conventional mortgage), and equity share (lender receives a percentage of the profits instead of or in addition to interest). It shows total cost to the borrower, total return to the lender, and compares each structure to a hard money alternative.
Whether you're raising capital for a flip, a BRRRR deal, or a long-term hold, this tool helps you structure a deal that's fair, transparent, and attractive to both parties.
Homebuyers, investors, and real-estate professionals all benefit from precise private money terms figures when evaluating properties, negotiating deals, or planning long-term investment strategies. Save this calculator and revisit it whenever market conditions or your financial situation changes.
Private money deals often fall apart because the terms are vague or unfair to one party. This calculator gives both borrower and lender clear numbers: exactly how much the borrower pays, exactly how much the lender earns, and how the deal compares to other financing options. Instant recalculation lets you compare scenarios side by side, so every buying, selling, or investment decision is grounded in solid financial analysis.
Interest-Only: Monthly = Loan × Rate / 12; Total = Monthly × Term Amortizing: Monthly = Loan × [r(1+r)^n / ((1+r)^n − 1)] where r = Rate/12, n = Term Equity Share: Lender Return = Profit × Equity Share % + (Loan × Rate / 12 × Term)
Result: Private cost = $12,000/yr | Hard money cost = $22,000/yr
Interest-only at 8% on $150,000 = $1,000/month = $12,000 total over 12 months. Equivalent hard money at 12% with 2 points = $18,000 interest + $3,000 points + $1,000 fees = $22,000. Private money saves $10,000 on this deal.
The best private money deals are structured so both parties feel they're getting a great deal. The borrower gets cheaper capital than hard money, and the lender earns a return that far exceeds anything they'd get from stocks, bonds, or savings accounts — secured by real property.
Interest-only is the most common structure for short-term flips because it minimizes monthly payments. Amortizing works better for longer-term holds where the borrower wants to build equity. Equity-share is ideal when the borrower has a deal but no capital, or when the lender wants investment upside rather than a fixed return.
Lenders should always secure their investment with a recorded deed of trust or mortgage. They should also require hazard insurance naming them as the loss payee, receive regular project updates, and have clear default remedies in the promissory note. Title insurance protects against liens and ownership disputes.
Private money refers to capital borrowed from individual investors rather than banks or hard money lenders. Sources include friends, family, business contacts, or high-net-worth individuals. The terms are negotiable between borrower and lender, making it highly flexible.
Most private lenders are happy with 7–10% annual returns, which far exceeds bank savings rates. The offer depends on risk: a first-position secured loan at 8% is compelling, while a second-position unsecured loan might require 12%+. Research your local market and lender expectations.
An interest-only loan requires the borrower to pay only interest each month, with the full principal due at the end of the term (balloon payment). This structure keeps monthly payments low and is ideal for short-term projects like flips where the property will be sold before maturity.
In an equity-share structure, the lender receives a percentage of the project's profit in addition to or instead of interest. For example, a lender might fund 100% of the deal and receive 50% of the profit. This aligns incentives but means the borrower gives up a share of the upside.
Yes, but it's regulated. The loan should be documented with a promissory note and secured by a deed of trust or mortgage recorded with the county. Both parties should consult attorneys. In some states, offering equity shares to multiple investors may trigger securities regulations.
Private money is typically cheaper (8–10% vs. 10—14%), has no or minimal origination points, and offers more flexible terms. Hard money is faster, more scalable, and doesn't require a personal relationship. Many investors use both: private money for their best deals and hard money to scale.