The simple definition
Private money is real estate lending from individual lenders, smaller funds, family offices, or trust-deed investment companies. The capital source is private — not institutional non-QM platforms. The underwriting is relationship-driven rather than templated.
Why investors use private money instead of hard money
The mechanical product is similar. The reasons to choose private money over hard money are structural:
- Flexibility on unconventional deals. Properties or borrower profiles institutional lenders won't touch — heavy distress, atypical property types, complex title situations.
- Faster close on relationships. Established private money operators can fund in 3–7 days when the institutional path is 14+.
- Negotiable terms. Rates, points, and structure are negotiated deal-by-deal rather than pulled from a rate sheet.
- Cross-collateralization options. Private money lenders sometimes accept cross-collateral or pool security on multi-property deals.
- Better pricing for trusted borrowers. Long-term relationships often price below institutional rates.
The relationship trade-off
Private money capacity is finite. A private money operator may have $10M–50M in capital deployed at any time across 20–60 active loans. They can't scale capacity overnight the way institutional non-QM platforms can. This means:
- You need to start the relationship before you have an urgent deal — capital may not be available when you need it
- Your track record matters more — private money operators know their borrowers personally
- Reliability matters more — a missed payment or extension request hurts your relationship
- Scaling fast is harder — institutional hard money is more elastic for high-volume operators
Chicago private money operators
The local Chicago private money ecosystem includes operators like Chicago Private Capital, Midwest Bridge Capital, Trust Deed Capital, Great Lakes Private Lending, and Pillar Capital Partners. Some focus on specific niches — Chicago-only, Cook County tax-sale financing, distressed acquisitions — and pricing reflects the specialization.
Beyond the named operators, Chicago has a deeper ecosystem of individual lenders and small family-office capital pools that work primarily through broker networks and don't market publicly. Many of the best private money relationships in Chicago come through trusted broker introductions rather than directory searches.
Typical Chicago private money terms
| Interest rates | 9.5%–13.0% |
|---|---|
| Origination points | 1.5–4 points |
| Maximum LTV | 65%–75% of ARV (typically more conservative than hard money) |
| Term lengths | 6–18 months |
| Loan size range | $50K–$3M typical |
| Close speed | 5–14 days for established relationships |
| Prepayment | Often negotiable; sometimes minimum-interest provisions |
| Property types | Broader than institutional — including atypical or distressed |
The "becoming a private lender" angle
Many sophisticated capital holders deploy as private money lenders themselves rather than borrow from them. Trust-deed investments, IRA real estate lending, and small private loan portfolios produce 8–13% yields with first-position security on Chicago real estate. Learn about becoming a private money lender →
Private money FAQ
Private money is real estate lending from individual lenders, smaller funds, family offices, or trust-deed investment companies rather than institutional non-QM platforms. The capital source is private rather than institutional, and underwriting is relationship-driven rather than templated.
Mechanically the products are similar — short-term, asset-based, secured by real estate. The differences are structural: private money is relationship-driven (track record matters more, pricing is negotiated, terms are flexible); hard money is institutional (standardized terms, faster origination on templated deals, broader product menus).
Not necessarily. Established private money relationships often price comparably to or below institutional hard money for borrowers with strong track records. The premium is paid in slower scaling — private money operators have finite capital and personal underwriting bandwidth.
Chicago has a deep private money ecosystem: Chicago Private Capital, Midwest Bridge Capital, Trust Deed Capital, Great Lakes Private Lending, Pillar Capital, and others. Plus individual lenders, family offices, and trust-deed investment pools that aren't necessarily publicly visible. Many work primarily through broker networks.
Three paths: (1) referrals from successful investors in your market, (2) Chicago REIA meetups and BiggerPockets local forums, (3) directory sites like this one. Trust matters more than terms in private money — start the relationship before you have an urgent deal.
Typical Chicago private money: $50K–2M loan size, 9.5–13% interest, 1.5–4 points, 6–18 month terms, 65–75% LTV. Faster close than institutional hard money for established relationships (5–10 days), more flexible on property type and condition, but smaller per-loan capacity.