Private Money Lender Rate of Return Calculator
Private money lenders charge high interest + origination fees but accept first-position collateral. Calculate the true IRR including points, default-adjusted yield, and effective LTV.
| Origination fee (points) | — |
| Total interest over term | — |
| Total gross return | — |
| Annualized yield (simple) | — |
| All-in IRR (points + interest) | — |
| ARV loan-to-value | — |
| Default-adjusted yield | — |
Private money lending — also called 'hard money' lending — provides short-term real estate loans secured by the property. Lenders charge 10-14% interest plus 2-4 origination points for terms of 6-18 months. The true yield is meaningfully higher than the stated rate because points are earned upfront on a deal that closes in 6-12 months.
How Yield Differs from Rate
A 12% rate + 3 points on a 9-month loan produces about 18-19% IRR — not 12%. Points are earned at funding; the lender's effective capital is loan minus points; total return is interest plus points returned at payoff. Always evaluate IRR, not stated rate.
Default and Recovery
Hard money default rates run 3-8% depending on underwriting discipline. On default, the lender forecloses and sells the property. Recovery typically 65-75% of ARV after foreclosure costs, holding costs, and broker fees. The 70% LTV-of-ARV rule exists to protect lender capital — at 80%+ LTV, a default scenario rarely recovers full loan.
Sourcing Deals
Higher-quality deals: fix-and-flip with 75% LTV-ARV cap, experienced borrower (5+ deals), proper repair budget, 6-month term. Lower-quality: cash-out refis at 80%+ LTV, ground-up construction (longer term + execution risk), unproven borrowers. Charge 1-2pt premium for higher risk profiles.
Last updated May 2026. Sources: American Association of Private Lenders, BiggerPockets Hard Money.