The short version
When a property deal needs cash, it can come from a bank or from private people. Private investors can put money in two basic ways: as a lender (debt) or as an owner (equity). Lenders get a fixed return and get paid first. Owners share the profit, and the loss, and get paid last.
Way 1: A private loan (debt)
You lend money on one property. The loan is secured by a deed of trust recorded on that property, so if the borrower doesn't repay, the lender can foreclose. You agree on an interest rate, a term and whether payments are monthly or at payoff.
Worked example: you lend $100,000 at 10% a year, interest-only, for 12 months. You'd receive $833.33 a month, $10,000 total, and your $100,000 back at payoff. If the property sells after 6 months and the loan is paid off early, you'd receive $5,000 in interest unless the note sets a minimum.
- What protects you: a first-position lien, a loan amount well below the property's value, title insurance naming you, and hazard insurance listing you as mortgagee.
- What can go wrong: the borrower stops paying, the property is worth less than thought, or foreclosure takes months and costs money.
Way 2: An equity partner on one deal
You co-own a single project, usually through an LLC, and split the profit when it sells or refinances. The operator finds the deal, manages the work and sells; you provide most or all of the cash.
Worked example, a fix-and-flip: buy for $120,000, renovate for $45,000, pay $3,000 in purchase closing costs and $6,000 in taxes, insurance and utilities over six months. Sell for $230,000 and pay about $18,400 in selling costs. Total cost: $192,400. Profit: $37,600. On a 50/50 split, an investor who put in $168,000 would get their money back plus $18,800, roughly 11% in six months.
Same deal when things go wrong: renovation runs $15,000 over budget, it takes nine months instead of six, and it sells for $210,000. Profit drops to about $1,200 to split. Equity investors take this risk; lenders usually don't.
Way 3: A fund or syndication
Many investors pool money into one entity that buys several properties or one large one. The sponsor manages it and investors own shares. Funds spread risk across properties, but you give up control and your money is often tied up for years. Because they sell interests to multiple investors, funds are securities and must follow federal and state securities rules, often limited to accredited investors.
Who gets paid first
Think of a stack. The bank loan, if any, is paid first. Private lenders are next. Equity partners are paid last, from whatever profit is left. Being lower in the stack means more risk and, in exchange, more upside.
Questions to ask before you invest
Ask these on any private deal, including one with Travis:
- What exactly secures my money? Can I see the deed of trust, title policy and insurance?
- What's the property worth today and after repairs, and which sold homes support that?
- What's the budget, timeline and plan if either runs over?
- How and when do I get paid, and what happens if the deal loses money?
- Who else is in the deal, and where am I in the payment order?
- Can my own attorney or CPA review the documents first?
Who Travis DeLoach is
Travis DeLoach runs The DeLoach Approach with Luxury Southern Realty in Hattiesburg, Mississippi. He sits on both sides of the table: a licensed real estate agent (MS License # S62442) and an active investor who buys property himself and works with a network of local investors, lenders and contractors.
- MLS access: he sees new listings, price drops and sold data the moment they hit, not days later on public sites.
- Off-market reach: sellers facing foreclosure, probate, liens, tired landlords and cash sales reach out to him directly through his seller guides and Sell Fast for Cash page.
- Pricing by hand: every value he gives is built from nearby sold homes he has checked himself, and he shows you the comps.
- Local coverage: Hattiesburg, Petal, Oak Grove, Sumrall, Purvis, Laurel and the Pine Belt, plus Jackson metro and the Mississippi Gulf Coast.
- A licensed duty: written agreements, clear disclosures and a legal duty to deal honestly. When he or his partners buy directly, they do so as principals and disclose his license.
- Reachable: call or text 601-287-9785, any day.
Read this before you invest
Every number in this guide is an illustration to show how the math works. It is not a projection, a typical result or an offer. Real deals can lose money.
This is general education, not investment, tax or legal advice, and not an offer to sell or a request to buy any security. Any specific investment is discussed one on one, with written terms, and only after you've had the chance to review it with your own attorney, CPA or financial advisor.
Frequently asked questions
What is private equity in real estate?+
Private money from individuals invested in property deals, either as loans secured by the property (debt) or as ownership shares in the profit (equity), instead of through banks or public markets.
Is a private real estate loan safer than equity?+
Usually less risky, because lenders are paid before equity owners and are secured by the property. It isn't risk-free: borrowers can default and foreclosure costs time and money.
How much money do I need to start?+
It depends on the deal. Single private loans in the Pine Belt are often tens of thousands of dollars or more. Funds may have their own minimums and investor requirements.
What is an accredited investor?+
Generally someone with over $200,000 in income ($300,000 with a spouse) in each of the last two years, or a net worth over $1 million not counting their home. Many private funds are limited to accredited investors.
How are private real estate returns taxed?+
Loan interest is usually taxed as ordinary income. Equity profits may be ordinary income or capital gains depending on how long the property is held and how the deal is structured. Ask a CPA.
Talk it through with Travis
No pressure. Tell Travis your goals and he'll walk you through how deals work, with real properties and written terms.
Related guides
This guide is general education, not investment, tax or legal advice, and not an offer to sell or a solicitation to buy any security. Example numbers are illustrations, not projections or typical results. Travis DeLoach is a licensed real estate agent in Mississippi (MS License # S62442) with Luxury Southern Realty.