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Lesson · Real estate · lending

Stop chasing deals. Be the bank.

Private money lending puts you on the other side of the table — secured, real-estate-backed returns from funding other investors' deals.

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NOT VETTED
Your custodian does not review deals for risk, merit, or suitability

KNOW THE DIFFERENCE

SECURED VS UNSECURED NOTES

Note plus mortgageNote only
Lien recordedNo collateral
Foreclose if unpaidSue for a judgment

How it works

TWO DOCUMENTS, THEN THE WIRE

1
Promissory noteRate, payment schedule, maturity date
2
Mortgage or deed of trustRecorded with the county recorder
3
Send both to your custodianThey wire from the account, not you

WORKED EXAMPLE

100K NOTE, 10 PERCENT, 12 MONTHS

$100,000 principalSecured by the property
10% interest only$833 per month
12-month maturity$10,000 interest total
Held inside a Roth IRAInterest not taxed yearly

Key points

TERMS TO SPELL OUT

✓
Interest rate
✓
Payment schedule
✓
Maturity date
✓
Acceleration clause
✓
Collateral referenced
✓
Late fees and default

THE RULES

WHO YOUR ACCOUNT CAN LEND TO

Unrelated third partyYou or your spouse
Interest paid to the accountInterest paid to you
Business you don't controlParents or children

Free download

The Private Money Lending field guide — one page

The strategy, the checklist, the key numbers, and links to the actual tax code. Print it, take it to your CPA. Free, no strings.

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Field guide · PDF

Private Money Lending

Cliff notes + checklist + the law

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The law behind it

Primary sources

Verify against the source before you rely on it. This is education, not legal or tax advice.

26 U.S.C. Sec. 4975 — Prohibited transactions — critical when lending from a self-directed IRA or Solo 401(k) (no dealing with disqualified persons).law.cornell.edu/uscode/text/26/4975
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