Private Money vs Hard Money
You’ve heard that you can use Hard Money Lenders to fund your real estate deals, or you can try to get Private Money Lenders. So what’s the difference?
First of all, many people think that Hard Money Lenders and Private Money Lenders are the same, as opposed to Banks or so called “Institutional Lenders”. While it’s true that both Hard Money and Private Money Lenders are not institutional and don’t have the same rigid reporting requirements as financial institutions and banks, there are several big differences.
What’s “Hard” about Hard Money?
It can be somewhat hard to get. But most of all it’s hard to pay for – meaning i can be very expensive.
Hard Money Lenders usually use the deal to make a decision on their lending you money, as opposed to your credit or income ratios or stuff like that.
So that makes it a lot easier to get a hard money loan than it is to get a bank loan, especially if you have poor credit or no credit. That’s not that important for hard money lenders, because they look at the deal and if there is enough equity they’ll make the loan.
On the expense side, hard money lenders usually charge between 12 and 18% interest plus 3 to 8 “points”, which can easily turn a great real estate deal into a mediocre one for you if you have to pay that much for the money.
The Private Money Advantage
Private money on the other hand is usually a lot cheaper for you. I have borrowed money for as little as 8% and 2 points, usually you can expect to pay 10-12% and no points. Also, sometimes a private money lender will let you “accrue” the interest which means that you don’t have to make any monthly payments while you’re holding the property.
You can get a lot more information – free by signing up for the free video series on Private Money Getting. Just check in to the Private Money Blueprint
