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Is Private Money Expensive? Maybe You're Asking the Wrong Question.
- Jacqueline OShaughnessy
- 5 days ago
- 4 min read
By Jacqueline O'Shaughnessy, Loan Officer / Private Capital, NMLS #382900 — South Wind Financial, Inc, NMLS #9462 — Las Vegas, NV
Private Money Explained – Part 4
Who This Guide Is For
You've found an investment property with great potential.
You contact a private lender, receive a loan quote, and your first reaction is:
"The interest rate is higher than my bank!"
That's true in many cases.
But experienced real estate investors often ask a different question:
"Will this loan help me make money?"
The Problem
Tom found a distressed property in an excellent neighborhood.
The seller needed to close in ten days.
His bank couldn't move that quickly.
A private lender could.
Tom hesitated because the interest rate was higher than a conventional mortgage.
While he was deciding, another investor purchased the property.
Months later, that property sold for a substantial profit.
Tom didn't lose the deal because of the interest rate.
He lost it because he focused only on the cost of the loan—not the value of the opportunity.
The Doubts
Borrowers often ask:
Why are private money rates higher?
Is private money too expensive?
Why wouldn't I just use a bank?
Does a higher interest rate mean it's a bad loan?
When does private money actually make sense?
These are important questions, and the answers depend on your investment goals.
Understanding the Cost of Private Money
Private money and conventional financing serve different purposes.
A traditional mortgage is often designed for long-term homeownership.
Private money is typically designed for speed, flexibility, and unique investment opportunities.
In many cases, investors use private financing because they need to:
Close quickly
Purchase properties that banks won't finance
Complete renovations
Bridge the gap until permanent financing is available
Compete with cash buyers
You're not simply paying for the money.
You're paying for access, flexibility, and the ability to seize an opportunity.
Look Beyond the Interest Rate
Imagine two investors.
Investor A
Passes on a profitable investment because the private loan carries a higher interest rate.
Result?
The opportunity disappears.
Investor B
Uses private money to purchase the property quickly.
Renovates it.
Sells it six months later for a healthy profit.
The financing cost becomes one expense within a successful investment.
The difference wasn't the interest rate.
The difference was recognizing the value of the opportunity.
Ask Better Questions
Instead of asking:
"What's the interest rate?"
Experienced investors ask:
Will this deal make money?
Can I close before someone else buys it?
Does this financing help me reach my investment goal?
What's my expected return after all expenses?
Does this loan solve a problem that conventional financing can't?
Those questions often lead to better investment decisions.
The Solution
Private money isn't designed to replace every loan.
It's a financing tool.
When used appropriately, it can help investors move quickly, solve problems, and capitalize on opportunities that may not be available through traditional financing.
The goal isn't always finding the lowest rate.
The goal is finding the financing that best supports your investment strategy.
Frequently Asked Questions
Why are private money interest rates typically higher?
Private lenders often finance transactions that involve greater complexity, shorter timelines, unique properties, or situations that don't fit traditional lending guidelines.
Does a higher rate mean it's a bad loan?
Not necessarily. The value of a loan depends on how it helps you achieve your investment goals—not just the interest rate.
When is private money a good option?
Private financing may be appropriate for time-sensitive purchases, renovation projects, bridge financing, and investment opportunities where speed and flexibility are important.
Can I refinance out of private money later?
Many investors use private financing temporarily and later refinance into long-term financing once the property or project is ready.
Private Money Terms
Private Money Loan: Short-term financing provided by a private individual or investment group, often used for investment properties, bridge loans, and renovation projects.
Bridge Loan: Temporary financing that helps borrowers purchase or improve a property until long-term financing or another repayment source becomes available.
Return on Investment (ROI): A measure of an investment's profitability after considering costs and potential returns.
Key Takeaways
Private money is designed for speed, flexibility, and opportunity.
A higher interest rate doesn't automatically make it the wrong financing choice.
Successful investors evaluate the entire investment—not just the loan cost.
The right financing is the financing that helps you accomplish your investment goals.
Every deal should be evaluated based on its overall profitability, timeline, and strategy.
Jacqueline's 30 Years of Experience
One of the biggest mistakes I've seen investors make is focusing only on the interest rate. Over nearly 30 years in private lending, I've watched successful investors ask a different question: "Does this loan help me achieve my goal?" Sometimes the answer is no—and I'll tell a client that. Other times, the opportunity far outweighs the financing cost. My job is to help you evaluate the entire investment so you can make an informed decision, not just compare rates.
Every investment opportunity is different, and so is every financing solution.
If you're considering private money for your next project, I'd be happy to review your investment, discuss your financing options, and help you determine whether private lending is the right fit for your goals.
Schedule a complimentary consultation today and let's talk about your next opportunity.
All my best
Jacqueline O'Shaughnessy | Loan Officer/Private Capital
South Wind Financial, Inc
6655 W. Sahara Ave., suite D114
Las Vegas, NV 89148
702-429-3994 cell
702-543-7535 eFax
Company NMLS #9462
Agent # 382900
Agent license #6603
CA-DFP1382900
AZ 1032777
FL L0101736
I've wondered for years how private money worked, and how it was beneficial for those who choose to need to go this route...your explanation and examples gave me a better understanding. Makes a lot of sense now. Thanks!
Very helpful