Real Estate Investors Explain Why They Work With Private Money Lenders

As of early July, mortgage rates are hovering around 6.7%.

Two real estate investors, Mike Gorius and Kevin Hart, are willing to pay nearly double that rate to work with private money lenders.

The main reason is speed and efficiency.

Gorius told Business Insider that compared with working with a traditional lender, “there’s a lot less paperwork and a lot fewer hoops to jump through.”

He and Hart, who quit their W-2 jobs to invest in real estate and pursue financial independence, do wholesales, wholetails, and flips primarily in Louisville, Kentucky. They also own more than 20 rental properties, including short-, mid-, and long-term, which BI verified by looking at settlement statements and closing documents.

Gorius noted that there are three main ways to borrow money in their industry: through a private money lender, a hard money lender, or a traditional lender. Traditional lenders generally offer the lowest rates, while hard money lenders tend to be the most expensive.

“As of right now having this conversation, what we are seeing is interest rates between 10% and 12% with private money lenders,” he said. “Hard money lenders, we’re seeing between 11% and 13% — usually they’re a little bit higher just because they’re actually going to have some staff and office buildings — and if you went through Fannie Mae and Freddie Mac, interest rates are 6% to 7% right now.”

Working with PMLs to close deals quickly

While private lenders can’t compete with traditional lenders on cost, they can offer speed — and that’s important to Gorius and Hart, who are closing deals weekly.

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“We do our own inspections because Kevin has all the experience and we don’t need to do an appraisal because we’re working with off-market sellers who are happy to work with us on price,” Gorius said. “Things can just move a lot quicker. It’s what allows us to buy properties in a matter of days versus a matter of weeks.”

Gorius said the fastest they’d ever closed on a deal was eight days, whereas working with a traditional lender would take at least 30 days and require more paperwork and headaches.

As for executing the deal, there are a few parties in the room: “We will all meet at the closing table virtually because these people are scattered across the US, so we have the seller, the title attorney, us, and essentially the bank, which is just a normal Joe Schmo that has capital.”

Gorius gives the example of a standard deal for him and Hart in Louisville: a flip that’ll cost about $150,000 — $100,000 for the property and $50,000 for the renovations.

“The private money lender, just like a bank, will deposit $150,000 into escrow. The $100,000 will go toward the seller, so they’ll walk away having sold the house, and we will now be the owners,” he said. “The deed is in mine and Kevin’s name, or our company name, and then the extra $50,000 is given to us at closing, so we now have $50,000 in our bank account that is to be used to rehab the house.”

The terms vary depending on the comfort level of the lender.

“Some people want interest-only monthly payments to know that we still have some skin in the game,” Gorius said. “Other folks are fine with having all the interest paid at the end.”

Once the rehab is complete and Gorius and Hart are ready to sell, the new buyer will deposit the sales price into escrow, and the title attorney will ensure that the private money lender gets their initial $150,000 back plus interest. Gorius and Hart will collect the remaining amount in profit.

How to find PMLs

Finding private money lenders typically requires networking and cold-calling.

Before Gorius built a network of lenders, he started with the 900 contacts in his phone.

“I just texted every single one of them and said: ‘Hey, I know we talked yesterday’ or ‘Hey, I know we haven’t talked in years, but I’m now investing in real estate. I know that can be exciting for some, not exciting for others, but if you ever have any questions or interest in learning about investing in real estate, please don’t hesitate to reach out,'” he said.

Then, it becomes a numbers game: “Maybe of the 900, you get nine people that actually say yes or respond or have a next step.”

Lean into what you can offer for your friend or former colleague or whomever you’re reaching out to. In this case, it’s a hands-off opportunity to invest in real estate and earn a greater return on your money than if you left it sitting in a bank account.

Another strategy Gorius uses is posting on social media and LinkedIn. In one post, he detailed his first flip, in which he put $18,000 of his own cash and doubled his money 10 weeks later.

“I made a post tailored around how if I had used someone else’s $18,000, 10 weeks later they could have gotten a solid return on that as well,” he said. “I was able to raise $280,000 off that one LinkedIn post.”

This article was originally published in March 2025.