Hard Money vs. Private Money in Real Estate

It comes down to your specific needs and preferences. If you value having total control over your projects, you may want to consider working with private lenders. However, if all you need is money and you don’t mind following some rules, hard money lenders could be a viable option.

last updated Wednesday, October 18, 2023
#Hard Money vs Private Money #

John Burson     Subscribe
Hard Money vs. Private Money in Real Estate


Are you looking to boost your real estate investment? Private and hard money can provide much-needed funding but with different terms. You need to know a few variances before choosing to go with either of the two loan options.

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 known financial institutions or banks. In most cases, the loans are given by individuals with extra money to lend at a particular interest rate. Upon agreement of the interest rates and the lending terms, the lender will provide you with the funds to purchase real estate and begin to pay it 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 in 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 you’ll negotiate all the lending terms. You need to agree on how long it will take to repay the loan and the interest rates you can pay. The lender also needs some good negotiation skills to reach a fair deal. Once the agreement 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 similarly to private capital, except that the lender will want to have a say in what you do with the loan. Every hard money lender specializes in certain areas they can lend to and not every other investment. They will have more control over the arrangement since they have extensive experience in such fields. 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 plan to purchase raw land, you will not qualify for the loan.


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