BiggerPockets Real Estate Podcast Summary
Episode: How to Buy Real Estate Without Banks (Private Money Lending)
Release Date: July 4, 2025
Host: Ashley Kerr (Guest Host)
Guest: James Dainard
Knowledge Cutoff: 2023-10

Introduction

In this insightful episode of the BiggerPockets Real Estate Podcast, guest host Ashley Kerr delves into the alternative financing method of private money lending, offering real estate investors a pathway to grow their portfolios without traditional bank involvement. Joining Ashley is James Dainard, a seasoned private money lender, who shares his expertise and real-world experiences to illuminate the nuances of private money deals.

Understanding Private Money Lending

Defining Private Money vs. Hard Money

Ashley opens the discussion by asking James to define private money and differentiate it from hard money and conventional lending.

Ashley Kerr [03:05]: "Can you explain what private money is? How does this differ from hard money and other kinds of conventional lending?"

James explains that while both hard money and private money lenders provide capital outside of traditional banks, private money lenders are typically individuals making their own lending decisions without institutional guidelines.

James Dainard [03:16]: "A private money lender is someone that's more of an individual that makes up their own rules on every different type of loan... it's a private individual that's financing the purchase or the rehab."

Advantages and Disadvantages of Private Money Lending

The conversation progresses to compare the roles of private money lenders versus equity partners. James highlights the security and guaranteed returns associated with lending, contrasted with the higher but riskier returns from equity partnerships.

James Dainard [07:35]: "As a lender, where you're financing the deal and you're charging an interest rate, points, and terms on the loan, I have a personal guarantee signed on that loan... When I'm lending you money, I know what my interest rate is."

Structuring a Private Money Deal

Interest Rates and Loan Terms

James discusses the typical interest rates and points he charges, emphasizing that terms can vary based on the risk and the borrower’s experience.

James Dainard [05:19]: "On my typical loan where it's just a first position loan, I'm usually charging about 12% and 2 points for my funds."

First Position vs. Second Position Liens

A crucial part of the episode covers the difference between first and second position liens, explaining the hierarchy of repayment and associated risks.

James Dainard [06:08]: "The second lender, which is a riskier position, is when someone comes in and they finance behind that senior lender... they get paid back second behind the first."

Example Deal Breakdown

Ashley Kerr’s First Solo Flip

Ashley shares a detailed example of her first solo flip financed through a private money deal with James. She outlines the property specifics, negotiation strategies, and how the loan was structured.

Ashley Kerr [18:14]: "For this Property, we did 2 points and 12% interest. And the interest and the points were rolled and wrapped into the loan to be paid in full when I sold the deal at the end of the six months term."

Terms and Conditions

James elaborates on the terms they negotiated, including the deferral of interest and ensuring the loan-to-value ratio remained within safe limits.

James Dainard [20:01]: "Because you came out of pocket with the rehab, that keeps my loan to value down... I can put the points at the end, I can put the interest at the end."

Protecting Yourself as a Private Money Lender

Identifying Red Flags

Ashley and James discuss key red flags lenders should watch for when evaluating potential deals and borrowers.

Ashley Kerr [16:21]: "So maybe you could go over what are some of the red flags that you see when lending?"

James Dainard [16:21]: "The biggest red flag to me... if you're not prepared and sending it to me in the correct way, that means you're not going to run your job site that well."

Legal Protections and Documentation

James emphasizes the importance of proper legal documentation to safeguard the lender’s investment, including promissory notes and deeds of trust.

James Dainard [26:44]: "You always want to hire an attorney to do all of your documents that is locally in that state... understanding what the lending laws are before you issue money."

Building Relationships with Lenders and Borrowers

Trust and Long-Term Partnerships

The episode highlights the significance of building trust and maintaining long-term relationships between lenders and borrowers to ensure smooth and secure transactions.

James Dainard [34:40]: "Most of the people that I do borrow hard money from or private money from, they've been partners of ours for over five, 10 years."

Balancing Debt and Equity Partnerships

James discusses his strategy of balancing debt and equity partnerships to mitigate risks and enhance portfolio growth.

James Dainard [32:37]: "It's a way to balance risk because you don't want to get too heavy into one bucket."

Conclusion

Ashley and James wrap up the episode by reinforcing the potential of private money lending as a robust tool for real estate investors seeking financial freedom and portfolio expansion without relying on traditional banks. They encourage listeners to build strong, transparent relationships with their private money partners and to approach such deals with due diligence and professionalism.

Ashley Kerr [37:39]: "If you have a good relationship and work well with each other, like those are the relationships to keep."

Throughout the episode, listeners gain a comprehensive understanding of private money lending, from foundational definitions to practical applications and protective measures. James Dainard’s experiences provide valuable insights, making this episode a must-listen for investors looking to diversify their financing strategies and achieve sustainable growth in the real estate market.

Notable Quotes:

• James Dainard [03:16]: "A private money lender is someone that's more of an individual that makes up their own rules on every different type of loan... it's a private individual that's financing the purchase or the rehab."

• James Dainard [07:35]: "As a lender, where you're financing the deal and you're charging an interest rate, points, and terms on the loan, I have a personal guarantee signed on that loan."

• James Dainard [26:44]: "You always want to hire an attorney to do all of your documents that is locally in that state... understanding what the lending laws are before you issue money."

• Ashley Kerr [37:39]: "If you have a good relationship and work well with each other, like those are the relationships to keep."

Resources Mentioned:

• BiggerPockets Conference: For more in-depth knowledge and networking opportunities, visit biggerpockets.com/conference.

• Self-Directed IRA Information: Learn more about self-directed IRAs at biggerpockets.com/blog/free-courses.

Disclaimer: The content of this summary is for informational purposes only and reflects the discussions from the podcast episode. Investment in real estate involves risk, and listeners should consult with qualified advisors before making investment decisions.