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Everything You Need to Know About Private Money for Real Estate

Welcome to today’s discussion on private money for real estate transactions. What is private money, when to use it, and how to make the whole process seamless. Our expert today is Alan Cowgill, an authority in the field. His vast experience and insights will guide us on sourcing, defining, and leveraging private money effectively.

Who is Alan Cowgill?

Alan started his journey in corporate America, dedicating 25 years to the sector. Throughout his career, Alan noticed a common pattern: many family members retired at a low-income level after a lifetime of work. Alan decided to change his trajectory to avoid the same fate.

His journey into real estate began with a disastrous first date, where his car burst into flames, underscoring his financial struggles. Late one night, a real estate infomercial captured his attention. Despite his debts and a lost lottery investment, he took a leap of faith, purchasing a home study course on real estate investing.

From his first two properties, Alan expanded rapidly, eventually acquiring hundreds of properties. He successfully navigated a significant downturn in the rental market by leveraging private lenders, highlighting the value of private money in his investment strategy.

What is Private Money and Why Should You Care?

Private money differs from hard money in a fundamental way: you set the terms. Hard money lenders act like banks, setting rules that you must follow. Private lenders, often individuals seeking better returns than traditional investments, allow you to determine the terms.

Key Differences:

  • Control: Hard money lenders set the rules; with private money, you set the rules.
  • Flexibility: Private lenders often allow more flexible and favorable terms.
  • Rates: Typically, private money can offer similar interest rates to hard money but without the extra hoops.

Attracting Private Lenders

Alan’s first private lender was his mother. He offered her a significantly higher return than bank CDs with simple interest payments secured by real estate. Building on that success, Alan secured additional lenders by demonstrating transparency and reliability.

Tips for Attracting Private Lenders:

  1. Start with People You Know: Friends, family, and associates are your initial sources.
  2. Host Group Meetings: Organize lunch meetings to present deals to multiple potential lenders at once.
  3. Up the Ante: Once a lender commits, ask if they would be interested in larger deals to potentially double their investment.

Key Paperwork

Once a lender commits, there are essential documents involved:

  • Mortgage: Secures the loan against the property.
  • Promissory Note: Details the repayment terms.
  • Hazard Insurance: Protects the property against damage.
  • Lender Title Insurance: Ensures clear property title.
  • Disclosure Statement: Outlines the loan details and terms.

Navigating the legal landscape of private money is crucial. Regulations vary by state and at the federal level. Alan’s advice underscores the importance of consulting with an SEC attorney to comply with regional rules.

Major Regulations:

  1. 504 Regulation: Allows raising up to $5 million with proper disclosures.
  2. Private Placement Memorandum (PPM): Unlimited funds for accredited investors.
  3. Family, Friends, and Associates Exemption: Start with personal connections to avoid legal complexities.


Private money offers real estate investors a flexible and powerful tool to finance their ventures. Alan Cowgill’s journey from financial struggles to successful property acquisition through private lenders demonstrates the potential of this financing strategy. By setting your own terms and attracting private lenders from your personal network, you can create mutually beneficial arrangements that propel your real estate endeavors forward. 

Remember, the key to success with private money lies in transparency, reliability, and adherence to legal regulations. With the right approach and guidance, private money can become the cornerstone of your real estate investment strategy.

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