Privite money

[Ted Bachman]

Would like to know how it works.

[Jon Holdman]

Sorry, @Karen Margrave and @Don Konipol but I'll stand by my statements. Now, I will acknowledge that none of these terms have any official meanings. And never will because there's no body to officially define them. Ultimately almost all money being lent for mortgages is "private". Meaning that it is money from some person that's being invested. When a bank makes a portfolio loan they're loaning money they have received from individuals who have savings accounts or CDs. Yet nobody would claim a bank mortgage is "private money". Many hard money lenders are often lending out money they have also gathered from individuals. I will argue a "private money loan" is when one person loans money to another. No middle man involved to take a cut of the interest or points or to tack on fees. I would say "peer to peer lending" has a distinction from private money in that one loan is funded by a number of individuals, not just one. And, yes, I'd agree with Don that the people funding these loans are typically faily unsophisticated. By the time you've accumulated enough cash to loan someone $100K (which should mean you have at least five to 10 times than amount of cash available) you're probably a pretty sophisticated investor. Those people absolutely do exist.

But, yes, all these are just fine slices of an onion. None of these terms have any real, official meaning. And none of them really have any implications about the rate and terms of the loan. Any of them could be all over the place.

I'll also say that I think when people say "I'm looking for private money" what they really mean is "I want hard money sort of terms (easy no get, loose credit qualifications, loan on a junker property) but I want lower interest rates, points and fees than I will get from a HML". That's fine. There are people out there who will make such loans. I've met some. And there are people who borrow on those terms. I've met some of them, too, most recently a rehabber I chatted with at the dump while we were both unloading our piles of debris.