What Are the Best Private Lending Options for Real Estate Investors?

Estimated reading time: 8 minutes

When a bank says no, or when time matters more than rate, private lending fills the gap. For real estate investors who need speed, flexibility, or who hold assets that conventional underwriting cannot accurately value, private capital has become the dominant financing tool. The question is which type of private loan fits your situation.

Private lending covers a wide range of structures, lenders, and use cases. Not all of them serve investors equally well, and choosing the wrong product can cost you as much as the deal itself. Below is an honest overview of the primary options available in today’s market, who each is designed for, and what to watch.

Understanding the Landscape

Private real estate lending exists outside the conventional mortgage system. No Fannie Mae guidelines, no debt-to-income ratios calculated against W-2s, no 60-day underwriting queues. The capital comes from individuals, funds, family offices, or specialty lenders, and it is secured by real property. In exchange for speed and flexibility, borrowers typically accept shorter terms, higher rates, and the expectation of a clearly defined exit strategy.

That trade is rational when the opportunity cost of not moving is larger than the financing premium. For fix-and-flip investors, ground-up developers, and business owners bridging to a conventional refinance, the math usually works. The lender’s job, and your job as a borrower, is to make certain the exit is real before the capital is committed.

The First Principle of Private Lending
A private loan should be a bridge, not a destination. The best lenders in this space will ask about your exit before they ask about your collateral. That is not a red flag. That is alignment.

The Primary Private Lending Options for Real Estate Investors

1. Hard Money Lenders

Hard money is the most broadly recognized form of private real estate lending. These are typically institutional or semi-institutional lenders, often organized as funds, that offer short-term first-position loans secured by the property’s as-is or after-repair value. Loan-to-value ratios generally range from 60 to 75 percent, terms run 6 to 24 months, and rates often fall between 10 and 14 percent depending on asset quality and borrower track record.

Hard money lenders move quickly and operate at scale. Their underwriting is asset-based, meaning your property matters far more than your tax returns. For experienced fix-and-flip investors acquiring distressed residential or light commercial assets, this is frequently the right tool. The limitation is that hard money lenders apply their own overlays, often reject unusual collateral, and rarely accommodate complexity or borrower-specific circumstances with much nuance.

2. Bridge Loans from Private Lenders

Bridge loans are short-term financing instruments designed to carry a borrower from one financial position to another. In practice, they are used when a conventional lender has declined to fund, when timing is too short for traditional underwriting, or when the property’s current condition or income profile does not yet qualify for permanent financing. The goal is always to bridge to something: a sale, a stabilization event, a refinance with a bank or credit union.

For business owners who own real estate and have been declined by a bank due to institutional policy shifts rather than asset weakness, bridge lending through a licensed California private lender is often the most protective option available. A well-structured bridge loan preserves the asset, provides working capital or payoff funds, and creates a credible runway back to conventional financing. The key variables are the combined loan-to-value against all senior debt, the lender’s understanding of the local market, and the clarity of the exit plan.

3. Second Position Loans

A second deed of trust allows a borrower to access equity that exists behind a first mortgage without refinancing or disturbing favorable terms on the senior loan. This structure is especially valuable when a borrower holds a low-rate first mortgage and needs capital for a project, payoff obligation, or business need, but does not want to surrender an advantageous rate by refinancing the entire position.

Second position lending carries more risk for the lender, which is why it requires careful underwriting of the combined loan-to-value and a lender with genuine local market knowledge. When done correctly, it is one of the more elegant tools in private lending: the borrower retains their existing senior debt, the lender holds a secured position against real equity, and the transaction solves a specific problem without unnecessary disruption. In Sonoma County and the broader North Bay market, where property values support meaningful equity positions, second DOT lending is an increasingly relevant option for established borrowers.

4. Individual Private Lenders

Beyond organized funds and specialty lenders, a significant amount of private real estate capital in California moves through individual investors, often high-net-worth individuals seeking secured, yield-bearing alternatives to equities. These lenders may offer terms that are more flexible, more patient, or more relationship-oriented than institutional products, particularly when the borrower has an existing relationship or a compelling story that a fund’s underwriting matrix cannot accommodate.

Accessing individual private capital typically requires either an established network or a licensed mortgage broker who maintains relationships with accredited investors. The California Department of Real Estate governs these transactions, and both the broker and the structure must comply with DRE licensing, threshold broker registration, and investor suitability requirements. When properly structured, individual private lending is one of the most powerful and flexible options in the market.

5. Debt Funds and Family Offices

Debt funds and family offices occupy the upper end of the private lending market, typically deploying larger loan amounts, often above $1 million, with more sophisticated underwriting and a stronger preference for income-producing commercial assets. Their cost of capital can be competitive with hard money, but their appetite for complexity is generally higher, and they are capable of underwriting transactions that require more nuanced analysis of business cash flow, receivables, or alternative income streams.

For investors working on larger multifamily acquisitions, mixed-use repositioning, or commercial-to-residential conversion projects, engaging a debt fund through a knowledgeable broker is often the most efficient path. The broker’s role in these relationships is to match asset profile and loan structure to the fund’s specific mandate, since most debt funds have clear parameters around geography, property type, and loan-to-value that a borrower researching independently would find difficult to identify without industry access.

What Distinguishes a Good Private Lender

The structure of a private loan matters. So does the lender’s character. Across any of the options above, there are a few consistent markers of a lender operating in alignment with the borrower’s interests rather than against them.

A trustworthy private lender will underwrite the exit, not just the collateral. They will be direct about terms from the first conversation, with no unexplained fees appearing at the closing table. They will have genuine knowledge of the local market they are lending in, and they will not promise more certainty than the situation warrants. In California, they will be properly licensed through the Department of Real Estate or the Department of Financial Protection and Innovation, a detail that is not administrative formality but a meaningful indicator of accountability.

Speed and simplicity are real advantages of private lending. They should not come at the cost of honesty or structure. The best transactions in this space are the ones where the borrower understands exactly what they are signing, the lender understands exactly what they are holding, and the exit is credible to both parties from day one.

For Northern California Investors
Mayacamas Lending specializes in bridge lending and private placement across Sonoma County and the greater North Bay. Our focus is asset-based underwriting, direct lender relationships, and a clear bridge-to-bank philosophy. We lend where we know the market, and we underwrite every loan with your exit in view from the first call.

Frequently Asked Questions

How fast can a private loan close?

Most private loans can close in 7 to 21 days depending on the lender, the complexity of the transaction, and the state of title. Simple single-asset transactions with clean title and a prepared borrower can close faster. Second position loans require coordination with the senior lender, which adds time.

What credit score is required for private lending?

Unlike conventional loans, private lenders do not set rigid credit score thresholds. Asset quality, equity position, and exit viability carry far more weight than FICO scores. A borrower with a complicated credit history but strong collateral and a credible plan is often fundable through a private lender where banks have declined.

Are private loans legal in California?

Yes. Private real estate loans in California are legal and regulated. Lenders facilitating transactions between borrowers and individual investors are required to hold a California DRE real estate broker license. The DRE also requires threshold broker registration and annual reporting for lenders above certain volume thresholds. Borrowers should confirm their lender’s licensing status before proceeding with any transaction.

What is a reasonable rate for a private bridge loan?

Rates for private bridge loans in California typically range from 10 to 14 percent annually, depending on lien position, combined loan-to-value, property type, and market conditions. Second position loans carry higher rates than first position loans, reflecting the increased risk the lender assumes. Points at origination are standard, typically ranging from one to three percent of the loan amount.

Mayacamas Lending Inc.  |  California DRE #02306252  |  Sonoma County, CA
Bridge lending, second position loans, and private placement for Northern California real estate investors and business owners.