Episode 8: Private Money 101 What Developers Must Know

Cody Douglas

Alright, welcome back to Dirt-2-Doors Radio, folks. We’ve covered a lot about systems and cities the last couple episodes—why cities are drowning in deferred maintenance, the origin of Dirt-2-Doors, all that. Today we’re zooming in on something way more personal: how you get your project funded—specifically, private money. Way too many new developers think all money is basically the same, but private money’s a different beast.

Jax Harper

I mean, I gotta admit, when I first started out, I thought—money’s money, right? Ha! Then I realized, nah, there are like a hundred different flavors and each one has its own, I dunno, personality? So Cody, just for everyone who’s totally new—what’s ‘private money’ in plain English?

Cody Douglas

Private money, in simple terms? It’s capital that doesn’t come from a big national bank. Instead, it comes from regular folks—individuals, private funds, family offices, sometimes even those mysterious hedge-backed debt groups. The magic is, these lenders care less about paperwork and red tape. They look at your deal, your collateral, the actual asset, and move quick. Banks take months to say ‘maybe’; a private lender can give you an answer—and sometimes a check—in days. I remember a local builder, a friend, had this six-figure project, and the bank kept pushing his application around. Private lender steps in, asks about the property, the exit plan, and funds him that same week. No waiting, no fifteen stacks of tax returns.

Tom

Yeah, ‘cause banks wanna know if your third cousin paid their utility bill back in 2002. Private lenders are like, ‘Is that lot build-ready? What’s your plan to pay back? Okay, let’s roll.’ Everything’s about the deal and the collateral, not jumping through hoops.

Jax Harper

So basically, they can move way faster. But, like—who are they? It’s not some guy in a smoky back room, is it?

Cody Douglas

Ha—not unless you’re watching old movies. It’s real people, real firms, sometimes big family offices with deep pockets. They want to put their money to work, and your deal is the vehicle. Way less bureaucracy—speed and risk rule the game.

Tom

And if you listened to our last two episodes, you know speed is everything in this industry, especially when the city’s not waiting for your funding to come through.

Cody Douglas

So, say you go the private money route—now there’s this whole foreign language. LTC, LTV, DSCR, bridge loan, points… And look, nobody comes outta the womb knowing what these mean. Jax, fire away—give me the plain-English rookie questions.

Jax Harper

Alright, not gonna lie, I used to think ‘points’ was like, ‘brownie points’ with a lender! But for real, what is a ‘point’? And why do lenders throw that term around like everybody’s supposed to just get it?

Cody Douglas

Good one. Points—think of it as the lender’s upfront fee for doing the deal. One point equals one percent of the loan. So if you borrow two hundred grand and there’s two points, that’s four thousand bucks you pay the lender, right off the top, to get that money moving.

Tom

And you’ll see terms like LTC and LTV. LTC’s just ‘loan-to-cost.’ The lender looks at the total project cost—land, construction, fees, holding—and they’re willing to fund, maybe, seventy percent of that. LTV is ‘loan-to-value,’ which is, ‘What’s this thing worth after it’s done?’ All those ratios just tell you how much skin you need in the game.

Jax Harper

Okay, simple enough… but what’s DSCR? I hear it tossed out all the time. Is that just another way to confuse us or does it matter for new folks?

Cody Douglas

DSCR means ‘Debt Service Coverage Ratio.’ It’s basically: does the property generate enough rental income to pay the mortgage—and then some? A DSCR over 1 means you’ve got cushion, under 1 means you’re running tight. Miss this, and lenders run for the hills.

Tom

I’ve got a story—there was this hotshot developer doing infill housing, looked great on paper. But he ignored the DSCR, skipped hiring a civil engineer for the site plan, and wouldn’t listen when the lender barked about needing an exit plan. Guess what? Weeks of wasted time, fees down the drain, lender walked. No one got paid, city’s still got a vacant lot, and his credibility? Toast.

Jax Harper

Ugh. So the stuff developers think isn’t a big deal is probably the stuff that’ll bite ‘em?

Cody Douglas

Every time. I’ve seen perfectly good deals torpedoed by bad or missing paperwork, no real timeline, no plan for what happens if Plan A fizzles. People rush, skip the basics—unrealistic budgets, half-baked docs, radio silence when lenders have questions. Private money’s fast, but you still gotta be organized and honest. You botch that, it’s over.

Tom

And don’t forget, if you bring land with no utilities or show up with no concept design, lenders know you’re not ready. No one writes a check on a wish.

Jax Harper

So let’s say you nail the docs, you’ve got a real plan. How do private lenders actually make the call? What’s that funnel they’re running your deal through?

Cody Douglas

Three big filters: one, the collateral—what’s the asset, is it worth what you say? Two, the exit strategy—how’s this thing gonna get paid back? Three, the sponsor—you. They’ll glance at your credit, but they care way more about the asset and if you actually have a plan. I mean, banks, all about FICO scores. Private money? Your deal has to make sense; your reputation’s the bonus.

Tom

And they wanna see you’ve got your head in the game. If your pitch is ‘trust me, bro’ and you can’t show a timeline or real plan, it’s dead on arrival.

Jax Harper

That sounds intimidating. But what about brokers—aren’t they just middle guys taking a cut? Or is there more to it?

Cody Douglas

Look, there are brokers, and then there are legit deal architects. A good broker’s way more than a paper pusher. They help structure your whole funding package, prep you for lender questions, hunt for the right money—not just any money. They protect project timelines, spot holes you missed, and honestly, they keep everyone honest. I had this one developer—jumbled docs everywhere, lenders barely listening. I helped him translate his plan into lender-speak, lined up the package, spoke to a super skeptical family office up in New York, and forty-eight hours later he had funding. That’s not luck; that’s strategy, that’s making the story land for people with capital.

Jax Harper

I watched you do that, Cody! I’ve never seen somebody go from ‘this is a mess’ to ‘approved!’ so fast. I was seriously thinking… why isn’t everyone doing it this way?

Tom

Most folks try to skip steps or think they can shortcut the process. They end up getting burned. That’s why having a pro broker or consultant who actually knows the ropes is worth every penny.

Cody Douglas

That’s the real lesson, right? Private money isn’t the last resort—it’s a powerful tool if you know how to use it. Builder, broker, lender—get the team aligned, respect the process, respect the clock, and keep the vision clear. There’s a lot more to cover in this world, but that’s where it begins.

Jax Harper

Man, next episode’s gonna be wild. We’re hopping into raising capital for big municipal and tribal projects—I’ve already got a page full of questions.

Tom

There are so many myths about those deals. We’re gonna bust a few wide open. Should be a good time.

Cody Douglas

Alright, that’s it for today on Dirt-2-Doors Radio. Thanks for hanging with us—Tom, Jax, always a pleasure. See y’all next episode, where we’ll keep breaking down real solutions and real talk for builders and developers everywhere. Take care.

Jax Harper

Peace out, everybody. Cody, Tom—see you next time.

Tom

Take it easy, y’all.