A private money loan can be understood as a partnership where a real estate investor and a financier come together to invest in a property. Rather than a conventional interest-based loan, this arrangement is based on a profit-sharing model, ensuring that both parties share the risks and rewards of the investment. The financier is given a legal stake in the property, secured by a first or second mortgage, ensuring their investment is safeguarded.


When a property is identified at a value below market price, the financier is offered the opportunity to fund the purchase and rehabilitation of the property. Instead of earning interest, the financier earns a share of the profits generated from the resale or rental of the property.