The Oldest and Most Trusted Real Estate News Magazine

Getting the Money: How to Finance Your Deals with Private Money


Julie Broad on "Getting Private Money for your RE deals"

Julie Broad on "Getting Private Money for your RE deals"

by Julie Broad

Quick – you need to get $10,000. What do you do? Many folks will either turn to their parents to borrow the money or they will head to their local bank for a loan. Eventually the bank of Mom and Dad grows tired of financing their child’s exploits (or runs dry!) and the local bank determines that you don’t fit their ideal client checklist. Now what?

For my husband Dave Peniuk and me, the single biggest challenge in 10 years of investing together, has been financing. Even before we became full time investors, when we had good paying full time jobs, we still had to do perfectly choreographed dances inside the bank boxes in search of funding for deals. With every deal we did, that dance became increasingly technical and frustrating. That was before the financing environment turned on it’s head. Today it’s extremely difficult to get bank financing no matter who you are – and if you’re like us and your primary source of income is from rental properties – good luck to you!

That’s why we’ve spent the bulk of our time finding alternative funding sources for our deals. Specifically we’ve focused on finding private money.

Private money is simply money from an individual (instead of a bank or credit union). It’s different than hard money. Hard money lenders finance deals for real estate investors as a business. They are more sophisticated in their investment terms and will typically seek quick repayment at high interest rates. With private money you can have more control over the terms of the loan. You can offer terms that suit your needs and offer a good return for your private lender.

The easiest way to find private money is to call your favourite mortgage broker and ask if they have any private lenders. Most mortgage brokers work with a few wealthy folks that have money to lend or they will refer you to a mortgage broker with private money connections. If you have decent credit and the property generates a solid cash flow you should be able to find money this way, but that money is expensive.

Want more info?
To watch a 6-minute video on three sources of private money, click here.


The upfront fees on those funds alone are usually1-3% of your mortgage amount. On a $250,000 mortgage that means up front you can start off with a $7,500 fee plus pay at least 7% interest on the loan. That’s ok if you’re in a pinch with a strong cash flowing property, but there are much better alternatives and the best part is that most of the alternatives involve giving your friends, family and fellow investors the opportunity to make a great return on their money backed by a great real estate asset!

We follow a pretty simple process for finding private money, but first let me share with you the main sources of the private money options available to you.

  1. Vendor Take Back Financing: Often referred to as a VTB, this is simply when the seller of a property holds some or the entire mortgage on the property. This is my favourite source of funding because it’s full of benefits to the seller. The seller already knows the property and holding the VTB allows them to continue making money after they’ve sold it without any management responsibilities, and it also allows them to delay the capital gains taxes (if the subject property was a revenue property) on the portion that is held in the VTB. Typically the best opportunity to secure a VTB is when you’re buying a property from another real estate investor.
  2. RRSP Funds (or IRA funds for the folks in the US): Mutual funds and stocks are not the only investments that are eligible to be held in those retirement savings accounts. A mortgage can be held in a self directed IRA account. I personally believe this is the largest untapped source of funds available to real estate investors because very few people know this option exists. Master this and you’ll always be able to find the funds for your deals. With no management fees or advisor commissions to pay, retirement savings holders could be making a stable and predictable 6, 7, even 10% or more return on their money inside their RRSP. How many people do you know that have delayed retirement plans because of a sudden dip in their retirement funds thanks to a swing in the markets? When holding a debt obligation in your retirement fund you have a lot more control over the risk, you have a say in the return you get, and you actually have recourse if you aren’t making the return you were promised (ask your Mutual Fund or Stock Advisor what recourse you have if those funds go down in value or disappear altogether).
  3. Cash from friends, family and fellow real estate professionals: One deal required an additional $10,000 in order to close. We didn’t have the funds but a realtor we knew did. He loaned us the money for 2 years at 10%. Our return was nearly double that so we still made money on the borrowed funds, and it enabled us to buy a triplex in a great area of Toronto that continues to generate positive cash flow while appreciating six years later. Additionally, we have a friend whose father has $200,000 sitting in a bank account earning 1.5% interest who is going to finance one of our upcoming deals for a 6% return. No bank dance for us, and he’s going to get 4 times the return on his money! There are so many options for using small or large amounts of other people’s cash that you’re only limited by your ability to be creative and communicate the benefits of the deal to your friends, family and fellow real estate be continued…

In part 2 of “Getting the Money” (coming soon), we will cover:

  • understanding that you’re NOT asking for money
  • how to create a list of potential private money sources
  • how to approach the people on that list (what to say and NOT say)

Stay tuned…

Want more info? To watch a 6-minute video on three sources of private money, click here.

Please leave your comments and questions below!

Julie Broad is a full time residential real estate investor, an award winning real estate blogger, and a regular contributor to Canadian Real Estate Magazine. With her free real estate investing newsletter ( and various coaching programs, she also dedicates a lot of time to helping new real estate investors transform their financial future with real estate. Julie and her husband Dave Peniuk have properties in four cities in Canada and are adding to that portfolio with one new rental house a month.

Tags: , ,

  • Julie Broad

    Thanks for your comment Kris!! I think there is always more to learn no matter how many years you’ve been invested or how many deals you do!!

Sitemap Madbadcat Graphics