By Brant Phillips, Houston Capital Group
So, you’re thinking about becoming a private lender?
First off—great decision.
Private lending is one of the most powerful, predictable, and passive ways to grow your wealth—without becoming a landlord, flipper, or dealing with Wall Street’s emotional rollercoaster.
That said, your first deal can feel a little intimidating. That’s normal.
I wrote about this in my book The Private Lender Playbook, but I want to give you a simple, high-level breakdown right here so you can take that next step with confidence.
Let’s walk through what it looks like to do your first private lending deal the right way.
Step 1: Understand the Basics of Private Lending
Private mortgage lending is when you loan your money—secured by real estate—to a real estate investor (like myself) in exchange for a fixed return. You become the bank.
✅ You’re not flipping houses.
✅ You’re not managing tenants.
✅ You’re not buying shares in a fund you can’t control.
You’re simply lending money, earning monthly interest payments, and holding a recorded lien on a real, physical property.
It’s that simple—and that powerful.
Step 2: Know the Players
Here’s how a typical deal is structured:
- You (the lender): Provide the capital for the deal.
- The borrower (usually an investor/operator): Uses the funds to purchase, renovate, or refinance a property.
- The title company/attorney: Handles the closing, records the documents, and disburses funds.
- The collateral: A property with a secured lien in your name as the lender.
Bonus: In my company, we cover the lender’s title insurance to ensure your loan is properly protected—something I always recommend.
Step 3: Understand Your Protection
Private lending isn’t just about returns. It’s about security.
Here’s how your capital is protected:
- Promissory Note: Details the loan amount, interest rate, term, and repayment schedule.
- Deed of Trust or Mortgage: This is the recorded lien that secures your loan to the property.
- Title Insurance: Protects against liens or defects in the property’s title.
- Hazard Insurance: The property should be insured, naming you as the mortgagee.
That’s what I love about private lending—it’s not just profitable, it’s secured.
Step 4: Know the Numbers
Every deal is different, but here are the numbers you’ll want to consider:
- Loan amount (typically 65–75% of After Repair Value)
- Interest rate (usually 8%–12%, depending on risk and structure)
- Term (often 6–12 months, but longer terms possible on rentals)
- Payment structure (monthly interest-only, or deferred balloon)
- Exit strategy (sale, refinance, or long-term hold)
Make sure you’re crystal clear on how and when you’ll get paid—and what happens if the borrower doesn’t perform.
(Hint: That’s when having a lien puts you in control.)
Step 5: Vet the Borrower (And the Deal)
Here’s where many new lenders go wrong: They look only at the return.
Smart lenders look at the borrower, the deal, and the track record.
Ask questions like:
- How many deals has this borrower done?
- What’s their worst deal—and how did they handle it?
- How much of their own money is in the deal?
- What’s the plan if the market shifts?
For example, I’ve personally never missed a mortgage payment in 16+ years and over 10,000 loans paid. That’s not a pitch—it’s a standard you should expect from anyone you lend to.
Step 6: Close the Deal Safely
Your funds should never be wired to the borrower directly. Always go through a licensed title company or attorney.
At closing, make sure:
- Your name/company is listed as lender on the note and deed of trust
- The loan is recorded in the proper county
- You receive copies of the note, deed of trust, title policy, and insurance
If something feels off—pause the deal. There’s no rush when your capital is on the line.
Step 7: Get Paid, Stay Passive
Once the deal is closed, your job is simple:
- Collect monthly interest payments
- Stay in communication with the borrower
- Ensure the loan matures and is paid off or refinanced as agreed
If something goes sideways, remember: You have a lien. You have rights. You have leverage.
Final Thoughts: You’re Not Alone
Every seasoned private lender started with their first deal. The key is to do it with someone who has a proven track record and puts your protection first.
Private lending isn’t just a financial decision—it’s a strategy to create passive income, preserve capital, and build generational wealth.
And it’s one of the best-kept secrets in investing.
If you’re serious about doing your first deal, I’d love to walk you through it.
Let’s build something that lasts.
Brant Phillips
Houston Capital Group
*By the way, if you want a comprehensive lending checklist, just let me know by sending an email to: info@houstoncapitalgroup.com