Every real estate investor knows what it feels like to be the one who needs the money — chasing a lender, waiting on an appraisal, hoping the file closes before the seller gets nervous. Fewer have thought about the other side of that transaction: being the one who has the money, and getting paid well to lend it against real property instead of buying and managing it yourself.

Private lending is exactly that — local investors (and plenty of Winner Realty clients) acting as the bank for other investors' flips, bridge purchases, and short-term deals. It's not glamorous, and it's not passive in the "set it and forget it" sense, but for the right person with capital to deploy, it's one of the more overlooked ways to put real estate to work without ever picking up a hammer or a tenant call.

What private lending actually is

Strip away the jargon and a private loan is simple: you lend money to another investor, secured by a promissory note and a mortgage (or deed of trust, depending on how the deal is papered) against the property they're buying or rehabbing. If they pay as agreed, you collect interest — often interest-only, paid monthly, with the principal returned in a lump sum when the property sells or refinances. If they don't pay, your mortgage gives you the right to foreclose and recover your capital from the property itself, the same way a bank would.

Most private loans in this space fund fix-and-flip purchases, bridge financing between a purchase and a refinance, or short-term gaps a conventional lender won't touch on their timeline. The borrower is usually another investor, not an owner-occupant — which matters, because owner-occupied lending triggers a much heavier compliance regime (Dodd-Frank, state mortgage-originator licensing) that most private lenders have no interest in navigating. Business-purpose loans to investors are a different, far simpler animal.

What it pays, and how deals get structured

Private money returns move with the broader rate environment, but as of 2026 investors funding real estate deals are typically earning somewhere in the 8% to 12% annual interest range, often with 1 to 3 points (a percentage of the loan amount) collected up front as an origination fee — on top of the interest, not instead of it. Terms usually run 6 to 24 months, matching how long a flip or bridge situation is expected to last. None of this is guaranteed; it's a function of risk, deal quality, and how badly the borrower needs to close quickly.

The number that matters more than the rate is the loan-to-value ratio. Conservative private lenders keep loans at roughly 65% to 75% of the property's value — not the purchase price, the real, appraised-or-comped value, ideally the after-repair value on a flip, discounted for a margin of error. That cushion is what protects you if the borrower's rehab budget runs over, the market softens, or the deal takes longer to sell than planned. First-lien position (meaning your mortgage is recorded first and gets paid before anyone else if the property is sold or foreclosed) is the standard a disciplined private lender insists on; second-lien or subordinated positions carry meaningfully more risk for not much more return.

Kentucky's interest rate rules

Kentucky's general usury statute, KRS 360.010, sets a default legal interest rate of 8% — but that default barely matters here, because the statute also says that for any written obligation over $15,000, the parties can agree to any rate they want, with no cap at all. Almost every private real estate loan clears that $15,000 threshold by a wide margin, which means the real governing rule isn't a rate ceiling — it's simply get it in writing. A handshake loan at a high rate can run into trouble; a properly documented promissory note at the same rate generally will not. This is a good reason to use a real estate attorney to draft (or at minimum review) the note and mortgage rather than pulling a template off the internet.

If a borrower stops paying, Kentucky requires a judicial foreclosure — meaning your attorney has to file suit and get a court judgment before the property can be sold, not a faster out-of-court process available in some other states. The borrower typically has 20 days to respond once served (Ky. R. Civ. P. 4.02), and under KRS 426.530 they retain a six-month right of redemption only if the property sells at the foreclosure sale for less than two-thirds of its appraised value — another reason conservative loan-to-value underwriting matters: a well-margined loan rarely ends up in that situation at all.

Lending through a retirement account

Private lending doesn't have to come out of a taxable brokerage account. A self-directed IRA or a Solo 401(k) can originate the loan directly, with interest flowing back into the retirement account tax-deferred (or tax-free, in a Roth structure) instead of onto your personal tax return. The tradeoff is administrative: the loan has to run through a custodian or trust company, the borrower can't be a disqualified person (yourself, your spouse, certain family members, or an entity you control), and every dollar of principal and interest has to flow back into the account, not your pocket. For investors who don't need the cash flow today, this is often the more tax-efficient way to run a private lending book.

The real risks

• Borrower default. Not every flip goes as planned. If the borrower stops paying, you're looking at a judicial foreclosure timeline measured in months, not days, plus legal costs.
• Being under-secured. A loan is only as safe as the value behind it. An inflated after-repair-value estimate or a rehab budget that runs over can leave you with less equity cushion than you thought you had.
• Illiquidity. Your capital is tied up until the loan is repaid, refinanced, or foreclosed. There's no secondary market to sell a private note if you need the cash back early.
• Market risk. If property values soften during the loan term, your protective equity cushion shrinks right along with them.
• Documentation matters. A sloppy or incomplete note and mortgage is the single biggest unforced error private lenders make — it's the difference between a clean foreclosure and a drawn-out legal fight.

One important distinction before you lend to anyone

A direct, bilateral loan from you to one borrower, secured by one property, is a private contract — not a security, and not something that requires a securities license to originate. That changes the moment money is pooled from multiple investors into a fund that then makes loans on their behalf; a pooled lending vehicle is generally a security and brings SEC and state securities registration into play. If you're thinking about raising capital from other people to lend out rather than lending your own money directly, that's a conversation for a securities attorney before it's a real estate conversation.

Winner Realty is not a lender, loan broker, or mortgage originator and doesn't draft loan documents. What we do well: connect private lenders to vetted, off-market deal flow through OffMarket.deals, help underwrite the real estate side of a potential loan (comps, after-repair value, title), and work alongside the real estate attorney who should always be the one drafting and reviewing your note and mortgage.

Frequently asked questions

How much money do I need to start private lending?

There's no fixed minimum, but most individual private loans on investor deals run anywhere from $50,000 to $300,000+ depending on the property and the borrower's needs. Lending a smaller amount as a partial participant alongside another private lender is possible but adds complexity to the documentation.

Is there a cap on the interest rate I can charge in Kentucky?

For a written loan over $15,000 — which covers nearly every real estate private loan — Kentucky law (KRS 360.010) doesn't cap the rate at all. The rate just needs to be agreed to in writing. The statutory 8% rate only applies by default when there's no written agreement.

What happens if the borrower doesn't pay?

You foreclose through Kentucky's judicial process — filing suit and getting a court judgment before the property can be sold. It takes longer than some other states' processes, which is exactly why conservative loan-to-value underwriting up front matters more than the interest rate you're charging.

Can I lend money from my IRA instead of my personal account?

Yes — a self-directed IRA or Solo 401(k) can originate the loan directly, with interest flowing back into the retirement account tax-advantaged. The borrower can't be you, your spouse, or certain other disqualified parties, and the loan has to run through a custodian rather than your personal bank account.

If you're sitting on capital and thinking about putting it to work as a private lender instead of a buyer, reach out to Rob and we'll walk through what vetted deal flow looks like and who to talk to about getting the loan documents right.