We have the same conversation most weeks. Someone who has done well in their own business, or in medicine, or in a career they are now winding down, has heard that private real estate lending pays around 10% and wants to know what the trick is.

There isn't a trick. There is a structure, and it has real trade-offs. This hard money lending FAQ is the version of that conversation we would have across a table, written down.

Hard money lending FAQ: the basics

A hard money loan is a short-term loan secured by real property, made to a real estate operator rather than a homeowner. The borrower is usually buying a house to renovate and resell, or building one, and needs money faster than a bank will move.

We make those loans in the Charleston tri-county: Charleston, Berkeley, and Dorchester counties. Every loan is in first position, meaning our lien sits ahead of every other claim on the property. Loans run about six to seven months on average. Investors in the fund are not buying houses. They are funding the loans and collecting interest.

What happens if a borrower stops paying?

This is the first question, always, and it should be.

Three things protect the capital, in order.

First position. If a property has to be sold to recover the loan, we are first in line. Not second behind a bank, not sharing with a mezzanine lender. First.

Conservative loan-to-value. We cap loans at 75% of value and our average has run in the mid-60s. That gap is the borrower's own money, sitting underneath ours. An operator who has real equity at risk behaves differently from one who does not.

Being local. We lend in three counties on purpose. When a payment slips, someone from our team can be standing in the house that week. Most trouble at that stage is still fixable: a draw that stalled, a contractor who walked off, a resale price that needs adjusting. Problems get expensive when nobody notices for ninety days.

If a loan cannot be fixed, we hold the lien and work the recovery ourselves rather than selling the paper at a discount.

Across more than 150 first-position loans since we started in April 2024, we have had zero foreclosures. That is not because nothing has ever gone sideways. It is because we price the risk at the front end and we do not let a late loan sit.

Is my money locked up?

Partly, and on purpose.

We offer three terms: 10.00% for one year, 10.50% for three years, and 10.75% for five. The minimum investment is $100,000. You pick a term because the loans underneath you have terms, and a fund that lets every investor leave on Tuesday cannot make a loan on Wednesday.

What is not locked up is the income. Distributions are paid monthly, by the 5th, and they have been every month since inception. Never gated, never queued, never partial. If you would rather compound than spend, our dividend reinvestment plan rolls each distribution back into your position automatically.

There is an early-withdrawal path under certain conditions, subject to fees. It exists because life happens. It is not the plan, and if you are likely to need the principal back inside a year, this is the wrong vehicle. We would rather say that on the phone than after the wire clears.

What is the catch on a 10% return?

Not a catch. A trade.

You are the lender, not the owner. As the lender you get a fixed rate, a first-position mortgage on real property, and a payment schedule. What you give up is the upside. If an operator buys a house well, renovates it sharply, and clears a large profit on the resale, that profit belongs to the operator. You get your rate.

That trade is the entire product. It sits between two things most people already own: less volatile than equities, better yielding than a CD or money market. It is not a substitute for either. It is the boring middle, and boring is the point.

Is this legal? Who is watching?

Yes. The fund is a Regulation D 506(c) private placement, which means we are permitted to talk about it publicly but can only accept accredited investors. Offering documents were drafted by a securities law firm and an outside accounting firm handles financial oversight. We are members of the American Association of Private Lenders.

If you want to understand what accreditation means, or what questions to ask any private offering before you fund it, the SEC's investor education site is the right starting point: investor.gov. We would rather you check us against a neutral source than take our word for it.

Why only Charleston?

Because underwriting is local knowledge, and local knowledge does not scale by adding a spreadsheet column.

Our real estate side has sold more than a thousand homes here and completed hundreds of renovation projects. That means when an operator brings us a resale number, we know whether that street supports it, whether that school zone supports it, and whether that number was achievable last spring but not this fall. A lender three states away is reading comps. We are reading the block.

The moment we lend somewhere we do not know that well, our best protection disappears and all we have left is the paperwork.

How do you get paid, and how do I know the numbers are real?

The fund earns the spread between what borrowers pay and what investors are paid. Our interests line up: we are only paid when loans perform, and a foreclosure costs us more than it costs any single investor.

Investors get monthly statements and a monthly fund update covering loans funded, loans paid off, capital deployed, average loan size, average loan-to-value, and distributions. If a number ever looks wrong, ask. We would rather answer an uncomfortable question than have you guessing.

What would have to happen for me to lose money?

Most funds will not put this in writing. Here it is.

You would need a property to sell for less than our loan balance plus recovery costs. Given a mid-60s average loan-to-value, that means a decline of more than a third in the value of a specific Charleston-area home, before we could act on it. And it would need to happen across enough loans at once to overwhelm the interest the rest of the portfolio is producing.

That is a severe scenario, not an impossible one. Real estate can fall. Anyone who tells you a real estate credit fund is risk-free is either careless or selling something. What we can tell you is where the risk actually sits, and what we do to keep it small: first position, conservative leverage, short duration, one market we know, and a hard no on deals whose exit is a hope rather than a plan.

Still have a question?

If yours is not answered here, ask it directly. The questions that make us uncomfortable are usually the ones worth answering in public.

Our monthly numbers go out to the Easy Cashflow list, past fund and market updates are in the news archive, and accredited investors can start a conversation at request investor access.

For accredited investors only. Past performance does not guarantee future returns. See 890capital.com for full disclosures.