Private Money Lender Yield Calculator
Private money lenders (PMLs) lend to real estate investors at 10-15% interest plus 2-4 origination points. Calculate the all-in yield and weigh against passive RE alternatives.
How Private Money Lending Works
Private money lenders fund real estate deals when traditional banks won't — usually fix-and-flips, distressed properties, or speed-of-execution scenarios. Loans are 6-18 months, 10-15% interest, plus 2-4 origination points. Always secured by a deed of trust on the underlying property at 60-75% LTV.
Yield vs Risk
12-15% yields are attractive vs. 5% Treasury or 7-9% high-yield bonds. But: illiquid (can't easily sell loan), concentrated (one borrower default can wipe out year's gains), and operational (require legal docs, possible foreclosure). Reserve at least 1-2% of principal for legal fees and 6 months of carrying costs in case of foreclosure.
Loan Origination Best Practices
Require: 60-75% LTV maximum (based on independent appraisal), borrower personal guarantee, title insurance, property insurance with lender named, monthly payment of interest only (not balloon), and reserves equal to 3 months of interest. Use standardized loan documents from a real estate attorney.
Source: American Association of Private Lenders (AAPL), Bigger Pockets private lending forum, state usury law variations. Last updated: May 2026.