The phrase “Other People’s Money” — OPM — is not just a catchy concept. It is a fundamental strategy used by the world’s most prolific real estate investors to build portfolios that would be impossible using only personal savings. The ability to source, structure, and deploy OPM is what allows investors to scale from one property to ten, twenty, or one hundred — without waiting years to save up each down payment.
The Three Primary Sources of OPM
1. Private Money Lenders
Private money lenders are individuals — often friends, family members, business associates, or fellow investors — who lend their capital in exchange for a fixed return, secured by real estate. Unlike banks, private lenders are flexible on terms, fast to close, and motivated by relationship rather than bureaucracy. A typical private money arrangement might offer the lender 8–10% annual interest, secured by a first or second mortgage on the property.
2. Hard Money Lenders
As covered in Part 3, hard money lenders are professional short-term lending companies that specialize in real estate. They are the most accessible form of OPM for investors without an established private network, and they are specifically designed to fund acquisitions and renovations quickly.
3. Seller Financing
Seller financing — also called owner financing — occurs when the property seller agrees to act as the bank. Instead of receiving a lump sum at closing, the seller accepts monthly payments from the buyer over an agreed term. This strategy can eliminate the need for a traditional bank entirely and is particularly powerful when purchasing from motivated sellers who own their properties free and clear.
| OPM Source | Typical Cost | Speed | Best Use Case |
|---|---|---|---|
| Private Money Lender | 7–12% interest | Days | Any acquisition or rehab |
| Hard Money Lender | 10–14% + points | 3–10 days | Fix-and-flip, BRRRR |
| Seller Financing | Negotiable (often 5–8%) | Immediate | Motivated sellers, creative deals |
| Partnership / JV | Equity split (30–50%) | Variable | Large deals, first-time investors |
| HELOC on Primary Home | Prime + 0.5–2% | 2–4 weeks | Down payments on rentals |
Joint Ventures: Splitting the Deal
A joint venture (JV) is a partnership where one party brings the capital and another brings the deal-finding, management, and execution expertise. This is an ideal structure for new investors who have the knowledge and hustle but lack the capital — and for experienced investors who have capital but lack the time to find and manage deals. A typical JV splits profits 50/50 or 60/40 between the money partner and the operating partner.
How to Attract Private Money
Building a private money network requires credibility, communication, and consistency. Investors who successfully raise private capital share several common practices: they track their deals meticulously and share performance reports with lenders, they always pay on time and in full, they are transparent about risks, and they treat their lenders as valued partners rather than just a source of funds. Over time, a reputation for delivering results becomes the most powerful fundraising tool available.
★ Key Takeaways — Part 5
- OPM allows investors to scale their portfolios far faster than personal savings alone would permit.
- Private money, hard money, seller financing, and joint ventures are the four primary OPM vehicles in real estate.
- Seller financing can eliminate the need for a bank entirely on the right deal.
- Building a private lending network is a long-term asset — treat every lender relationship with the same care as a business partnership.