Similarities between Hard Money and Private Money

Real estate developers can use either hard money or private money to acquire funding for purchasing real estate properties. The two options are both outside the traditional bank lending industry. You can therefore not receive such loans from the known financial institutions or banks. In most cases, the loans are given by individuals who have extra money to lend at a particular interest rate. Upon agreement of the interest rates and the terms of lending, the lender will give you the money to purchase real estate and begin to pay back.

Features of Private Money Loans for Real Estate

When you acquire private money, you will be in charge of how you spend it. Private lenders care less about the details of your business arrangements. They differ from real estate investors who will have stakes at what you do and where you invest the money. All that matters is your ability to pay back the money with the accrued interest. Therefore, working with private lenders means that you’ll negotiate all the terms of the lending. You need to agree on how long it will take you to repay the loan and the interest rates you’re able to pay. The lender needs some good negotiation skills as well to reach a fair deal. Once the deal is approved, they’ll give you the money, and you’re free to invest it wherever you want- provided you repay the debt within the specified duration.

Features of Hard Money Loans for Real Estate

Hard money works in a similar fashion as the private money, except the fact that the lender will want to have a say on what you do with the loan. Every hard money lender specializes in certain areas they can lend to and not every other investment. Since they have extensive experience in such fields, they will have more control over the arrangement. They also dictate what you can invest in and the duration you should take to repay the loan. Additionally, they have preset interest rates that you’re going to pay.

Hard money lenders will dig into the specific information regarding the real estate transaction. For instance, if the hard money lender only wants to invest in rehab projects and you’re planning to purchase raw land, you will not qualify for the loan.