Security Matters Most: How Private Lenders Protect Their Capital

If you’re a private lender or considering becoming one there’s a single question that should come before interest rates, returns, or deal projections:

How is my investment secured?

It’s the first question I ask anytime I evaluate a deal as a lender myself. Because while returns matter, long-term success in private lending comes from protecting the downside first.

In the short video below, I walk through the fundamentals every private lender should understand especially when lending on single-family real estate. This is not a deep legal dive, but a practical framework designed to help you invest confidently and sleep well at night.

🎥 Watch the Video: How Is My Investment Secured?

 

 

What You’ll Learn in This Video
In this overview, I cover:

If you’re new to private lending or simply want to reinforce good habits—this is a great place to start.

Full Video Transcription Below:
How Is My Investment Secured?

Hello my friend, Brant Phillips here.

Today I want to go over one of the most important questions private lenders should always be asking especially when you’re just getting started, but even if you’re experienced.

That question is simple:

How is my investment secured?

This should be the number one question you ask when you’re evaluating a deal or lending to a borrower. It’s certainly the first question I ask anytime I’m acting as a lender on my own deals.

The good news is that in the vast majority of cases probably 98% of single-family deals the security structure looks very similar. So let’s walk through what that actually means.

The Property Is the Security But Not the Only One
At its core, the real estate is your security.

But one of my lenders once told me something that stuck with me. He said:

“I understand the real estate is the security, but you, the borrower, are my real security. Because if something happens, I need to know               I can trust you.”

That’s an important distinction.

No matter how good the property looks on paper, the borrower is always an adjoining layer of security. Integrity, experience, and communication matter because even great deals can go sideways.

For today, I’m focusing primarily on single-family properties, since that’s where most private lenders start and where I typically advise people to begin. Commercial deals follow many of the same principles but include additional nuances we don’t need to get into here.

Common Scenarios Private Lenders Fund

Most private lenders are funding deals where an investor is:

These are the most common scenarios.

First Checkpoint: How Is the Deal Closing?

The first thing you should confirm is simple:

Is the property closing through a title company or a qualified real estate attorney?

Some states use title companies. Others use attorney closings. Either is fine—as long as the process is professional, legitimate, and compliant.

You want everything handled properly and above board.

The Core Loan Documents
Next are the loan instruments the documents that bind the agreement.

You should expect:

– Loan amount

– Interest rate

– Term and maturity date

– Payment structure

You should receive and review these documents before closing.

At closing, there will also be a deed of trust (or mortgage, depending on the state). This document is recorded with the county and establishes you as the lender of record. If the borrower defaults, this is what protects your rights.

Title Protection
You’ll also want:

This helps ensure there are no title issues that could jeopardize your lien.

Insurance Is Essential
The property should always be insured.

In most cases, we require the first year of insurance to be paid in full upfront. This avoids missed payments and provides peace of mind. While there can be exceptions, the bottom line is simple:

The property must be insured at all times.

Rehab Funds Require a Scope of Work
If rehab funds are part of the loan, request a detailed scope of work.

If you’re lending $50,000 for repairs, it’s fair to ask exactly how that money will be used. A scope of work helps protect your position and gives you a roadmap if you ever need to step in and complete the project.

Surveys Should Be Non-Negotiable
I also encourage lenders to require a survey.

Either:

This confirms boundaries and prevents future surprises. For me as a lender, this is non-negotiable.

The Borrower Still Matters
Even with all the right documents in place, the borrower matters.

Deals don’t always go as planned. When challenges arise, integrity and experience make all the difference. Always take time to vet the borrower’s background, experience, and references.

A Final Warning on Wire Fraud
One last but extremely important point:

Wire fraud is real.

Always:

Funds should almost always be wired to the title company or closing attorney, not directly to the borrower.

Final Thoughts
Private lending should allow you to sleep well at night.

If it doesn’t, it’s probably not the right deal.

If you want a deeper dive into these fundamentals, I cover them in detail in The Private Lender Playbook. And if you ever have questions, feel free to reach out. My goal is to be an advocate for private lenders and help you protect your capital while taking advantage of a powerful opportunity when it’s done the right way.

Build Something Predictable, Build Something That Lasts,
Brant Phillips