Primer5 min readDraft — client review

What is a private real estate loan?

Why private lending exists, who uses it, and how it differs from a bank mortgage — in plain language.

A private real estate loan is short-term financing on a property, funded by private capital rather than a bank. It's used by experienced operators when speed, flexibility, or the property itself doesn't fit the bank box.

Why private lending exists

Banks are excellent at 30-year mortgages on move-in-ready owner-occupied houses. They're less well suited to a fix-and-flip that closes in 10 days, a new construction with a moving budget, or a bridge to close before another loan matures. Private lenders fill those gaps.

The trade-off is straightforward: private capital moves faster and takes on situations banks won't, and in exchange investors earn higher interest than a savings account or a bond.

Who uses it

Operators buying to rehab and resell (fix & flip)
Owners refinancing a stabilized rental before a long-term bank loan is ready (rental refi)
Buyers taking down a property while a bank or 1031 exchange catches up (bridge)
Builders funding land acquisition + hard costs on a new construction

How it differs from a bank mortgage

Comparison

Private vs. bank

Typical decision time: 24 hours vs. 30–60 days
Term: 12 months vs. 15–30 years
LTV cap: 65% of ARV vs. 75–80% of purchase
Property use: Non-owner-occupied vs. usually owner-occupied
Borrower vehicle: Business entity vs. individual
Rate: Higher, reflecting speed + flexibility

When it fits

Private is a great fit when you can articulate an exit — sale, refinance, or 1031 exchange — inside a 12-month window. It's the wrong tool for buying your primary residence, or for holding a property indefinitely.