Private Money Lending in Hawaiʻi: What Could Go Wrong (And How Smart Investors Think About Risk)
If you’ve read anything about private money lending, you’ve probably noticed something missing.
Everyone talks about:
Returns
Passive income
Real estate security
Very few people talk honestly about risk.
We believe that’s a mistake.
So let’s talk openly about what could go wrong when participating in private real estate lending — and how experienced investors think about these realities.
First: Private Lending Is Not “Risk-Free”
No real investment is.
Private lending is not the same as a savings account or treasury bond. It involves:
Real assets
Real people
Real timelines
The goal isn’t to eliminate risk entirely — it’s to understand it, price it, and manage it responsibly.
Risk #1: The Project Takes Longer Than Expected
This is one of the most common issues.
In Hawaiʻi, delays can come from:
Contractor availability
Permitting or inspections
HOA approvals
Insurance or utility coordination
How this is typically addressed:
Short-term loans with built-in buffers
Extension options clearly documented
Conservative timelines (not best-case scenarios)
Time risk is real — which is why clarity around exit strategies matters.
Risk #2: The Property Doesn’t Perform as Planned
Sometimes:
Renovations cost more than expected
Rents take longer to stabilize
Market conditions shift
This is why private lending is typically structured with:
Conservative loan-to-value positions
Defined collateral
Clear priority of repayment
Experienced investors don’t rely on “everything going perfectly.”
They plan for margins.
Risk #3: Borrower Execution Risk
This one matters more than spreadsheets.
Even a great property can underperform if:
The operator lacks experience
Communication breaks down
Expectations aren’t aligned
That’s why relationship, transparency, and communication cadence matter as much as numbers.
Private lenders should always feel comfortable asking:
How will I be updated?
What happens if the plan changes?
What decisions require my awareness?
Risk #4: Liquidity (Your Capital Is Not Instantly Accessible)
Unlike stocks, private lending is not liquid.
Your capital is typically committed for:
A defined term
A specific project
A specific exit strategy
This is why private lending should only involve capital you don’t need immediate access to.
Clarity beats urgency every time.
Risk #5: Legal Structure Matters (A Lot)
Not all private lending arrangements are equal.
Poorly documented deals can create:
Confusion
Disputes
Misaligned expectations
Well-structured deals include:
Promissory notes
Clear repayment terms
Defined security interests
Transparent disclosures
Documentation isn’t about complexity — it’s about protection and clarity.
Why We Believe Transparency Wins
We don’t believe in overselling.
We believe:
Informed partners make better decisions
Clear expectations build long-term relationships
Saying “this isn’t a fit” is just as important as saying “yes”
Private lending works best when everyone understands:
The upside
The downside
The plan
The contingencies
The Right Question Isn’t “Is This Risky?”
The better question is:
“Do I understand the risk well enough to decide intelligently?”
For many people, the answer becomes clear once they have:
Context
Real examples
An honest conversation
Final Thought
If you ever feel rushed, pressured, or confused — pause.
The best private lending relationships move at the speed of clarity, not hype.
And if you’re still curious after understanding the risks, that’s usually a good sign you’re approaching this thoughtfully.
If you’d like to learn how private lending is structured in real-world Hawaiʻi projects — including risks, safeguards, and expectations — we’re always open to a conversation. Send us an email or shoot us a text, we’re just a phone call away.
Educational Notice:
This article is intended for general educational purposes only. It does not constitute investment advice, legal advice, or a recommendation to participate in any specific transaction. Any examples discussed are illustrative and may not reflect actual outcomes.
Real estate investments and private lending arrangements carry inherent risks, including delays, changes in market conditions, and potential loss of capital. Each opportunity should be evaluated independently based on individual circumstances.