Private Money (Hard Money is for Suckers)

Flipper/Rehabber · Northern Virginia · Member since 2019 · 58 posts · 32 votes

Good Morning BP Community,

Is Hard Money really for suckers?

My wife and I have done about 30 flips over the past few years, typically with a partner of ours that has a good amount of cash which he invests, then we split the profit. He has also invested like this with us on a couple of high-producing STR beach houses (that net each of us around 70K per house each year). We do all of the work and management, he invests the down payment and improvements (20%, plus improvements), we get the DSCR loan in our name (80%), we split the profits. Each house is set up in an LLC.

Before we started working with our partner, we did a couple of hard money loans for flips, which went fine. We really like our business partner and want to keep working with him, but we don't want to keep going to him for every deal that we have and use up all of his cash. He really likes us and has a hard time saying no to us, I am exploring alternative sources for financing some of our flips and STRs.

I saw an ad for PrivateMoney.com - the Headline says Hard Money is for suckers. Is it? Has anyone worked with PrivateMoney.com or a similar service? Is it better than Hard Money loans?

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Robin SimonBusiness Member

Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes

Quote from @Josh H.:

Good Morning BP Community,

Is Hard Money really for suckers?

I saw an ad for PrivateMoney.com - the Headline says Hard Money is for suckers. Is it? Has anyone worked with PrivateMoney.com or a similar service? Is it better than Hard Money loans?

The terminology between what is "Private Money" and what is "Hard Money" is very vague and these aren't even really truly distinct different options. Further, there are a wide spectrum of lenders that can range from very good to very bad among lenders that brand themselves as "Private Money" "Hard Money" or "Private Lenders"

Your best bet is likely to follow reviews and like you've been doing now with partnerships that you trust, but your instinct is right to have relationships with multiple lenders and options. Especially if you are looking at niche strategies such as STRs or "AirBnBRRRRs" - where some lenders might be better than others for specific projects

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Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
2y
Quote from @Josh H.:

Good Morning BP Community,
Is Hard Money really for suckers?

My wife and I have done about 30 flips over the past few years, typically with a partner of ours that has a good amount of cash which he invests, then we split the profit. He has also invested like this with us on a couple of high-producing STR beach houses (that net each of us around 70K per house each year). We do all of the work and management, he invests the down payment and improvements (20%, plus improvements), we get the DSCR loan in our name (80%), we split the profits. Each house is set up in an LLC.

Before we started working with our partner, we did a couple of hard money loans for flips, which went fine. We really like our business partner and want to keep working with him, but we don't want to keep going to him for every deal that we have and use up all of his cash. He really likes us and has a hard time saying no to us, I am exploring alternative sources for financing some of our flips and STRs.

I saw an ad for PrivateMoney.com - the Headline says Hard Money is for suckers. Is it? Has anyone worked with PrivateMoney.com or a similar service? Is it better than Hard Money loans?

The terminology between what is "Private Money" and what is "Hard Money" is very vague and these aren't even really truly distinct different options. Further, there are a wide spectrum of lenders that can range from very good to very bad among lenders that brand themselves as "Private Money" "Hard Money" or "Private Lenders"
Your best bet is likely to follow reviews and like you've been doing now with partnerships that you trust, but your instinct is right to have relationships with multiple lenders and options. Especially if you are looking at niche strategies such as STRs or "AirBnBRRRRs" - where some lenders might be better than others for specific projects
[email protected]
Harpoon Capital514 Reviews
Website View Page
5 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
any private lenders that advertises for business is a HARD MONEY LENDER .. HML just went to private money to give the allusion that you are going to find some rich doctor that is going to lend you money at 5%.
private money hard money is quite competitive these days.. you can plan on 2 to 4 points up front at close and 10 to 15% interest plus junk fees and rehab draw fees appraisal fees etc etc.
some of the larger national lenders have their pricing very well spelled out on their websites you may want to get a baseline from them
Kiavi
Lima one
Lending one
etc etc..
Pricing for HML or PML which are the exact same thing.. typically are very regional some areas are quite a bit higher than others.. the Lowest in the Country is for prime CA. real estate then everything gets more expensive as you move form state to state. with some of the East cost states being quite a bit more.. but there is a ton of risk loaning in NY PA NJ given their foreclosure rules etc so thats why rates are generally higher there .
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5 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
PS since I work as a capital partner just like the guy your using now. there is huge benefits compared to borrowing from HML or PML.. the benefits are basically if the deals start to wobble you have much more flexibility to work them out with your capital partner then U do a HML PML who wont show you the same flexibility.. mainly because they cant they are tagging their wholesale lines and there are rules for using them that your simply not aware of as the end buyer but will become very aware of if a deal cant be paid as agreed for any reason. And also not a dig on Brokers but Brokers can basically offer zero help in most instances if your having issues.. they get paid to close the loan then are out of the picture they have no authority to do workouts or modify terms etc U would be working with the actual lender then..
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3 Reply
Ko KashiwagiPro Member
Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
2y
Hi Josh,
There are definitely pros and cons on both ends. Moreover, many use those terms interchangeably which makes it even more confusing. I've seen investors struck home run terms with private money because they were able to find good people and build relationships, but there are also people who've had terrible experiences and even been scammed. Either direction you go, it would be important to verify their credibility through word of mouth and reviews.
310-848-9776
1 Reply
Mike Klarman
Specialist · NJ · Member since 2022 · 1k+ posts · 649 votes
2y
You have one of those dream situations of using other people's money. To answer your question at the top of the post, is Hard Money For Suckers? I'd say no, although there are investors who will get taken advantage of by their loan officer or broker.
You have a great situation that has allowed you to operate with no financial exposure. these are those situations you hear about in the podcasts and the books that advertise starting with zero money.
So, looking at it from a loan officer's perspective, if you come to me with your experience and your credit and the asset's number's work, then you should be able to get a 90%/100% program on a bridge loan which means you are in for 10% of purchase price for entire project cost. It sounds like that's an affordable position for you and your husband - but that is from the outside looking in. No one really knows what goes on behind closed doors as they say.
2 Reply
Josh H.
OP
Flipper/Rehabber · Northern Virginia · Member since 2019 · 58 posts · 32 votes
2y
Quote from @Jay Hinrichs:

PS since I work as a capital partner just like the guy your using now. there is huge benefits compared to borrowing from HML or PML.. the benefits are basically if the deals start to wobble you have much more flexibility to work them out with your capital partner then U do a HML PML who wont show you the same flexibility.. mainly because they cant they are tagging their wholesale lines and there are rules for using them that your simply not aware of as the end buyer but will become very aware of if a deal cant be paid as agreed for any reason. And also not a dig on Brokers but Brokers can basically offer zero help in most instances if your having issues.. they get paid to close the loan then are out of the picture they have no authority to do workouts or modify terms etc U would be working with the actual lender then..

Thank you for your very thoughtful and informative responses, Jay. I really appreciate it. I see your point. I hadn't hoped for rates of 5% from a wealthy doctor, but would love to shave anything that I can off of the cost to do business. We work hard cut costs as much as possible, everywhere that we can. I would like to work with more private money lenders because the costs can be a little lower, when there is not as much overhead involved, such as their office space, HR person or department, payroll processing, etc. I just need to find more private money lenders to work with.
0 Reply
Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
2y
Quote from @Jay Hinrichs:

any private lenders that advertises for business is a HARD MONEY LENDER .. HML just went to private money to give the allusion that you are going to find some rich doctor that is going to lend you money at 5%.
private money hard money is quite competitive these days.. you can plan on 2 to 4 points up front at close and 10 to 15% interest plus junk fees and rehab draw fees appraisal fees etc etc.
some of the larger national lenders have their pricing very well spelled out on their websites you may want to get a baseline from them
Kiavi
Lima one
Lending one
etc etc..
Pricing for HML or PML which are the exact same thing.. typically are very regional some areas are quite a bit higher than others.. the Lowest in the Country is for prime CA. real estate then everything gets more expensive as you move form state to state. with some of the East cost states being quite a bit more.. but there is a ton of risk loaning in NY PA NJ given their foreclosure rules etc so thats why rates are generally higher there .

This is accurate but I would really like to emphasize that "private lender" has become the best name for DSCR Loans as well which really should be distinct from Hard Money Loans - DSCR Loans (from private lenders) are much closer in form and rate to non-QM and even conventional than hard money.
We for example would consider ourselves "Private Lender" with "DSCR Loans" for turnkey rental properties and "Hard Money Loans" for loans requiring rehab for a flip or BRRRR. Then Ground-Up Construction Loans are probably a third category, all under the "Private Lender" bucket
[email protected]
Harpoon Capital514 Reviews
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1 Reply
Jesse TomlinPro Member
Shreveport LA. · Member since 2022 · 7 posts · 1 vote
2y
Quote from @Josh H.:

Good Morning BP Community,
Is Hard Money really for suckers?

My wife and I have done about 30 flips over the past few years, typically with a partner of ours that has a good amount of cash which he invests, then we split the profit. He has also invested like this with us on a couple of high-producing STR beach houses (that net each of us around 70K per house each year). We do all of the work and management, he invests the down payment and improvements (20%, plus improvements), we get the DSCR loan in our name (80%), we split the profits. Each house is set up in an LLC.

Before we started working with our partner, we did a couple of hard money loans for flips, which went fine. We really like our business partner and want to keep working with him, but we don't want to keep going to him for every deal that we have and use up all of his cash. He really likes us and has a hard time saying no to us, I am exploring alternative sources for financing some of our flips and STRs.

I saw an ad for PrivateMoney.com - the Headline says Hard Money is for suckers. Is it? Has anyone worked with PrivateMoney.com or a similar service? Is it better than Hard Money loans?

Hi Josh,
I'm interested in structuring a deal with an investor much like you mentioned in your post. Do you split the profits 50/50 or does it vary deal to deal? I've never entered into a real estate partnership and would like to make it a win win for everyone involved. Thanks in advance.
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Josh H.:

Quote from @Jay Hinrichs:

PS since I work as a capital partner just like the guy your using now. there is huge benefits compared to borrowing from HML or PML.. the benefits are basically if the deals start to wobble you have much more flexibility to work them out with your capital partner then U do a HML PML who wont show you the same flexibility.. mainly because they cant they are tagging their wholesale lines and there are rules for using them that your simply not aware of as the end buyer but will become very aware of if a deal cant be paid as agreed for any reason. And also not a dig on Brokers but Brokers can basically offer zero help in most instances if your having issues.. they get paid to close the loan then are out of the picture they have no authority to do workouts or modify terms etc U would be working with the actual lender then..

Thank you for your very thoughtful and informative responses, Jay. I really appreciate it. I see your point. I hadn't hoped for rates of 5% from a wealthy doctor, but would love to shave anything that I can off of the cost to do business. We work hard cut costs as much as possible, everywhere that we can. I would like to work with more private money lenders because the costs can be a little lower, when there is not as much overhead involved, such as their office space, HR person or department, payroll processing, etc. I just need to find more private money lenders to work with.

anyone advertising to loan money is going to have overhead and will know what pricing is you might cut 1/2 point or a bips but that will be it.. And actually the bigger companies can be more competitive because they have a lot more money to loan and can work on thinner margins. Main thing is to be very careful there are ALLL sorts of scammers out there that will tell you what yo want to hear try to suck up front money out of you then go dark.. Or Brokers that talk a great game but cant fund at the end of the day.. I would ride the horse that has gotten you this far unless they are out of funds.. Capital partner is a very safe way to go.
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JLH Capital Partners51 Review
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1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Robin Simon:

Quote from @Jay Hinrichs:

any private lenders that advertises for business is a HARD MONEY LENDER .. HML just went to private money to give the allusion that you are going to find some rich doctor that is going to lend you money at 5%.
private money hard money is quite competitive these days.. you can plan on 2 to 4 points up front at close and 10 to 15% interest plus junk fees and rehab draw fees appraisal fees etc etc.
some of the larger national lenders have their pricing very well spelled out on their websites you may want to get a baseline from them
Kiavi
Lima one
Lending one
etc etc..
Pricing for HML or PML which are the exact same thing.. typically are very regional some areas are quite a bit higher than others.. the Lowest in the Country is for prime CA. real estate then everything gets more expensive as you move form state to state. with some of the East cost states being quite a bit more.. but there is a ton of risk loaning in NY PA NJ given their foreclosure rules etc so thats why rates are generally higher there .

This is accurate but I would really like to emphasize that "private lender" has become the best name for DSCR Loans as well which really should be distinct from Hard Money Loans - DSCR Loans (from private lenders) are much closer in form and rate to non-QM and even conventional than hard money.
We for example would consider ourselves "Private Lender" with "DSCR Loans" for turnkey rental properties and "Hard Money Loans" for loans requiring rehab for a flip or BRRRR. Then Ground-Up Construction Loans are probably a third category, all under the "Private Lender" bucket

agreed those are NON QM lenders NOT private money lenders you guys just confuse the crap out of the public trying to convince them that your private money. The reason is private money to almost every borrower means some individual not in the bizz of loaning money and might be happier with lower rates or points Just like the OP is thinking..

We know DSCR lenders are backed by large wall street hedge funds everyone knows that and they have millions if not billions behind them anything but a private lender who is someone you know personally etc.. its one reason they can do non QM and take that huge risk of only basically lending on the asset and its cash flow. Once the borrower is tied into these they are quite cumbersome to manage for the borrower and god forbid there is a default of any kind :) or with the pre pay penalties and the reporting and the covenants to keep a certain DSR etc etc I mean look at all the syndicators who are leaking oil because they cant meet loan covenants.. now you take a fairly new borrower who really does not read or understand the 30 page mortgage and if they have a blip they will quickly get a lesson in Wall st. lending.
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JLH Capital Partners51 Review
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1 Reply
Josh H.
OP
Flipper/Rehabber · Northern Virginia · Member since 2019 · 58 posts · 32 votes
2y
Quote from @Jesse Tomlin:

Quote from @Josh H.:

Good Morning BP Community,
Is Hard Money really for suckers?

My wife and I have done about 30 flips over the past few years, typically with a partner of ours that has a good amount of cash which he invests, then we split the profit. He has also invested like this with us on a couple of high-producing STR beach houses (that net each of us around 70K per house each year). We do all of the work and management, he invests the down payment and improvements (20%, plus improvements), we get the DSCR loan in our name (80%), we split the profits. Each house is set up in an LLC.

Before we started working with our partner, we did a couple of hard money loans for flips, which went fine. We really like our business partner and want to keep working with him, but we don't want to keep going to him for every deal that we have and use up all of his cash. He really likes us and has a hard time saying no to us, I am exploring alternative sources for financing some of our flips and STRs.

I saw an ad for PrivateMoney.com - the Headline says Hard Money is for suckers. Is it? Has anyone worked with PrivateMoney.com or a similar service? Is it better than Hard Money loans?

Hi Josh,
I'm interested in structuring a deal with an investor much like you mentioned in your post. Do you split the profits 50/50 or does it vary deal to deal? I've never entered into a real estate partnership and would like to make it a win win for everyone involved. Thanks in advance.
Hi Jesse,
Yes, that is the way we structure deals with our capital partners, the profit is split 50/50 for every deal. Everything is spelled out in the LLC operating agreement as a 50/50 split there, that way no one gets greedy and tries to get creative at the end.
2 Reply
Jesse TomlinPro Member
Shreveport LA. · Member since 2022 · 7 posts · 1 vote
2y
Quote from @Josh H.:

Quote from @Jesse Tomlin:

Quote from @Josh H.:

Good Morning BP Community,
Is Hard Money really for suckers?

My wife and I have done about 30 flips over the past few years, typically with a partner of ours that has a good amount of cash which he invests, then we split the profit. He has also invested like this with us on a couple of high-producing STR beach houses (that net each of us around 70K per house each year). We do all of the work and management, he invests the down payment and improvements (20%, plus improvements), we get the DSCR loan in our name (80%), we split the profits. Each house is set up in an LLC.

Before we started working with our partner, we did a couple of hard money loans for flips, which went fine. We really like our business partner and want to keep working with him, but we don't want to keep going to him for every deal that we have and use up all of his cash. He really likes us and has a hard time saying no to us, I am exploring alternative sources for financing some of our flips and STRs.

I saw an ad for PrivateMoney.com - the Headline says Hard Money is for suckers. Is it? Has anyone worked with PrivateMoney.com or a similar service? Is it better than Hard Money loans?

Hi Josh,
I'm interested in structuring a deal with an investor much like you mentioned in your post. Do you split the profits 50/50 or does it vary deal to deal? I've never entered into a real estate partnership and would like to make it a win win for everyone involved. Thanks in advance.
Hi Jesse,
Yes, that is the way we structure deals with our capital partners, the profit is split 50/50 for every deal. Everything is spelled out in the LLC operating agreement as a 50/50 split there, that way no one gets greedy and tries to get creative at the end.

Great! Thank you so much for the info. I'm looking forward to the advantages of forming a partnership, hopefully without any major mishaps.
0 Reply
Jeff S.
Lender · Los Angeles, CA · Member since 2009 · 1k+ posts · 2k+ votes
2y
The entire, “What should I call myself as a lender?” has been around forever and solves nothing. More concerning, @Josh H., is you’re splitting your profit 50/50 with a partner and suggesting hard money is for suckers?? Do you run the numbers for each deal? Do you really know the cost of your financing options? Hmmm.

We run a detailed evaluation of each scenario and find that most house flippers only estimate their final profit and don't know all their true costs. It's easy to show that for a typical Private/HML loan, where rates are in the 11% /2pt ballpark, the P/HML will take approximately 25% to 33% of the profit. You're freely giving away 50%. This could be worth it if your investor were adding value beyond providing the money. You indicate, however, “We do all of the work and management…,” so I have my doubts.

You’re also making assumptions about service with little apparent basis. P/HMLs run the gamut from disinterested brokers who might arrange a loan for a fee and then disappear, to the giant mega P/HMLs that are more concerned about keeping their Wall Street investors happy, to smaller lenders who lend their own money and actually care that you make a profit. All provide a service, but it sounds like you’re looking for the last type.

The website you referenced is nothing more than a referral site -- and a bad one at that. (Most of the links don't work.) Like that on BP, Scotsman Guide, AAPL, CMA, NPLA, and so on, referral sites like these are a dime a dozen. You're not looking for a list, are you? Face-to-face is the way to meet small service-based lenders, Josh, and real estate clubs are the most efficient way to find them.

I know everyone gets tired of hearing it but lending really is a business based on relationships. If you must squeeze the last tenth of a percent out of a loan to make money, which you don't, I suggest you need better deals. If you’re looking for service over the course of a loan, for example, if you have a problem and need an accommodation, then you need someone who cares. Smaller lenders like us (and @Jay Hinrichs), who lend their own money professionally, are your best bet. You won’t find these on a referral site. Nor will these people care what you call them.
3 Reply
Josh H.
OP
Flipper/Rehabber · Northern Virginia · Member since 2019 · 58 posts · 32 votes
2y
Quote from @Jeff S.:

The entire, “What should I call myself as a lender?” has been around forever and solves nothing. More concerning, @Josh H., is you’re splitting your profit 50/50 with a partner and suggesting hard money is for suckers?? Do you run the numbers for each deal? Do you really know the cost of your financing options? Hmmm.

We run a detailed evaluation of each scenario and find that most house flippers only estimate their final profit and don't know all their true costs. It's easy to show that for a typical Private/HML loan, where rates are in the 11% /2pt ballpark, the P/HML will take approximately 25% to 33% of the profit. You're freely giving away 50%. This could be worth it if your investor were adding value beyond providing the money. You indicate, however, “We do all of the work and management…,” so I have my doubts.

You’re also making assumptions about service with little apparent basis. P/HMLs run the gamut from disinterested brokers who might arrange a loan for a fee and then disappear, to the giant mega P/HMLs that are more concerned about keeping their Wall Street investors happy, to smaller lenders who lend their own money and actually care that you make a profit. All provide a service, but it sounds like you’re looking for the last type.

The website you referenced is nothing more than a referral site -- and a bad one at that. (Most of the links don't work.) Like that on BP, Scotsman Guide, AAPL, CMA, NPLA, and so on, referral sites like these are a dime a dozen. You're not looking for a list, are you? Face-to-face is the way to meet small service-based lenders, Josh, and real estate clubs are the most efficient way to find them.

I know everyone gets tired of hearing it but lending really is a business based on relationships. If you must squeeze the last tenth of a percent out of a loan to make money, which you don't, I suggest you need better deals. If you’re looking for service over the course of a loan, for example, if you have a problem and need an accommodation, then you need someone who cares. Smaller lenders like us (and @Jay Hinrichs), who lend their own money professionally, are your best bet. You won’t find these on a referral site. Nor will these people care what you call them.

Good points. Thank you for the reply. To clarify, I wasn't saying that hard money is for suckers, I was asking - but the forum wouldn't let me put a question mark in the post title for some reason.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Josh H.:

Quote from @Jeff S.:

The entire, “What should I call myself as a lender?” has been around forever and solves nothing. More concerning, @Josh H., is you’re splitting your profit 50/50 with a partner and suggesting hard money is for suckers?? Do you run the numbers for each deal? Do you really know the cost of your financing options? Hmmm.

We run a detailed evaluation of each scenario and find that most house flippers only estimate their final profit and don't know all their true costs. It's easy to show that for a typical Private/HML loan, where rates are in the 11% /2pt ballpark, the P/HML will take approximately 25% to 33% of the profit. You're freely giving away 50%. This could be worth it if your investor were adding value beyond providing the money. You indicate, however, “We do all of the work and management…,” so I have my doubts.

You’re also making assumptions about service with little apparent basis. P/HMLs run the gamut from disinterested brokers who might arrange a loan for a fee and then disappear, to the giant mega P/HMLs that are more concerned about keeping their Wall Street investors happy, to smaller lenders who lend their own money and actually care that you make a profit. All provide a service, but it sounds like you’re looking for the last type.

The website you referenced is nothing more than a referral site -- and a bad one at that. (Most of the links don't work.) Like that on BP, Scotsman Guide, AAPL, CMA, NPLA, and so on, referral sites like these are a dime a dozen. You're not looking for a list, are you? Face-to-face is the way to meet small service-based lenders, Josh, and real estate clubs are the most efficient way to find them.

I know everyone gets tired of hearing it but lending really is a business based on relationships. If you must squeeze the last tenth of a percent out of a loan to make money, which you don't, I suggest you need better deals. If you’re looking for service over the course of a loan, for example, if you have a problem and need an accommodation, then you need someone who cares. Smaller lenders like us (and @Jay Hinrichs), who lend their own money professionally, are your best bet. You won’t find these on a referral site. Nor will these people care what you call them.

Good points. Thank you for the reply. To clarify, I wasn't saying that hard money is for suckers, I was asking - but the forum wouldn't let me put a question mark in the post title for some reason.

to add to Jeff's point about if you have a problem.. this is a real case with one of my clients who left me for the bigger national lender who was cheaper than us.. And not known to this borrower is that his paper was being sold to ( assigned to ) Peer st.

He starts to have an issue with a few of the projects He misses some payments on those two.. Nasty grams ensue. Keep in mind this guy was a bigger player so he had Lots of deals out with this lender and now peer st. he cant solve the issue quick enough bad blood ensues . And little did he know one late pay or default on any of the loans throws all his loans into default interest .. So his 12% rate on 10 mil of loans jumps to default interest rate of 19%.. and long story short they cant work it out and he ends up going BK and losing all his business.. Peer st and his original lender who probably had some buy back provisions are in the middle of this massive BK and no one wins.. That was 3 years ago most props BK has sold and its still not settled.. Peer st is broke and gone client is broke and gone.. HML is still active I wont name them but I am sure they took some pretty good hits as well.

Now granted I could not have done all his loans for him at that size but I could have been doing a chunk of them like i had the previous 3 years. And unless they just walk away we always work things out with our clients when its appropriate.. This will happen with high frequency borrowers not every deal is perfect and some need special attention and so With folks like @Jeff S. and I we hop on the phone and work it out or have face to face and work it out.. NO one wants a foreclosure the idea that lenders are fine foreclosing is misnomer big time. And yes my fee's for my services are higher than the national lenders for sure.
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JLH Capital Partners51 Review
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1 Reply
Anderson S.Business Member
Lender · Brooklyn, NY · Member since 2024 · 209 posts · 50 votes
2y
Quote from @Josh H.:

Good Morning BP Community,
Is Hard Money really for suckers?

My wife and I have done about 30 flips over the past few years, typically with a partner of ours that has a good amount of cash which he invests, then we split the profit. He has also invested like this with us on a couple of high-producing STR beach houses (that net each of us around 70K per house each year). We do all of the work and management, he invests the down payment and improvements (20%, plus improvements), we get the DSCR loan in our name (80%), we split the profits. Each house is set up in an LLC.

Before we started working with our partner, we did a couple of hard money loans for flips, which went fine. We really like our business partner and want to keep working with him, but we don't want to keep going to him for every deal that we have and use up all of his cash. He really likes us and has a hard time saying no to us, I am exploring alternative sources for financing some of our flips and STRs.

I saw an ad for PrivateMoney.com - the Headline says Hard Money is for suckers. Is it? Has anyone worked with PrivateMoney.com or a similar service? Is it better than Hard Money loans?
Hi Josh,

It’s a great question, and one many investors consider. While "hard money" and "private money" are often used interchangeably, there are subtle differences:

Hard Money Loans: Typically offered by established companies or groups of investors. These loans are secured by real estate and have higher interest rates and shorter terms. They focus more on the property's value rather than the borrower's creditworthiness. Hard money loans are often used for flips due to their quick approval and funding process.

Private Money Loans: These are sourced from individual private investors or informal networks, such as friends, family, or acquaintances. The terms can be more flexible and negotiable since they are not bound by institutional lending criteria. Rates and terms vary widely based on the relationship and agreement between the lender and borrower.

Comparison:
- Interest Rates and Fees: Both can be high, but private money might offer more favorable terms if you have a good relationship with the lender.
- Approval and Flexibility: Private money can be more flexible and tailored to your needs, while hard money has standardized criteria.
- Source: Hard money comes from companies; private money comes from individuals.
Your business partner’s model has worked well, but diversifying your financing sources is smart. Both private and hard money loans have their place, and neither is inherently for "suckers." It’s about finding what fits your needs best. If you're curious about learning about hard money feel free to DM me.
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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
2y
Quote from @Anderson S.:
Quote from @Josh H.:

Good Morning BP Community,
Is Hard Money really for suckers?

My wife and I have done about 30 flips over the past few years, typically with a partner of ours that has a good amount of cash which he invests, then we split the profit. He has also invested like this with us on a couple of high-producing STR beach houses (that net each of us around 70K per house each year). We do all of the work and management, he invests the down payment and improvements (20%, plus improvements), we get the DSCR loan in our name (80%), we split the profits. Each house is set up in an LLC.

Before we started working with our partner, we did a couple of hard money loans for flips, which went fine. We really like our business partner and want to keep working with him, but we don't want to keep going to him for every deal that we have and use up all of his cash. He really likes us and has a hard time saying no to us, I am exploring alternative sources for financing some of our flips and STRs.

I saw an ad for PrivateMoney.com - the Headline says Hard Money is for suckers. Is it? Has anyone worked with PrivateMoney.com or a similar service? Is it better than Hard Money loans?
Hi Josh,

It’s a great question, and one many investors consider. While "hard money" and "private money" are often used interchangeably, there are subtle differences:

Hard Money Loans: Typically offered by established companies or groups of investors. These loans are secured by real estate and have higher interest rates and shorter terms. They focus more on the property's value rather than the borrower's creditworthiness. Hard money loans are often used for flips due to their quick approval and funding process.

Private Money Loans: These are sourced from individual private investors or informal networks, such as friends, family, or acquaintances. The terms can be more flexible and negotiable since they are not bound by institutional lending criteria. Rates and terms vary widely based on the relationship and agreement between the lender and borrower.

Comparison:

Interest Rates and Fees: Both can be high, but private money might offer more favorable terms if you have a good relationship with the lender.
Approval and Flexibility: Private money can be more flexible and tailored to your needs, while hard money has standardized criteria.
Source: Hard money comes from companies; private money comes from individuals.

Your business partner’s model has worked well, but diversifying your financing sources is smart. Both private and hard money loans have their place, and neither is inherently for "suckers." It’s about finding what fits your needs best. If you're curious about learning about hard money feel free to DM me.
This is a pretty solid comment.
I would also add that private money is not as readily available compared to a hard money loan. The terms may also be not as competitive compared to a traditional institutional hard money loan, since there is more risk and less funding readily available from individual private money lenders. Most private money terms I have seen are anywhere from 50-65% LTV Rates anywhere from 9.5-10.5% with little if any documentation required.
Institutional Hard Money lenders have a lot more credit exposure, since there are banks, hedge funds, and corporations backing the funding. You can get away with putting 10% down and having 100% of the renovations financed since there is a bigger pool of investors willing to buy the note and funding is much more available. The drawback is more paperwork, guideline restrictions, and may require higher credit scores.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Erik Estrada:
Quote from @Anderson S.:

Quote from @Josh H.:

Good Morning BP Community,
Is Hard Money really for suckers?

My wife and I have done about 30 flips over the past few years, typically with a partner of ours that has a good amount of cash which he invests, then we split the profit. He has also invested like this with us on a couple of high-producing STR beach houses (that net each of us around 70K per house each year). We do all of the work and management, he invests the down payment and improvements (20%, plus improvements), we get the DSCR loan in our name (80%), we split the profits. Each house is set up in an LLC.

Before we started working with our partner, we did a couple of hard money loans for flips, which went fine. We really like our business partner and want to keep working with him, but we don't want to keep going to him for every deal that we have and use up all of his cash. He really likes us and has a hard time saying no to us, I am exploring alternative sources for financing some of our flips and STRs.

I saw an ad for PrivateMoney.com - the Headline says Hard Money is for suckers. Is it? Has anyone worked with PrivateMoney.com or a similar service? Is it better than Hard Money loans?
Hi Josh,

It’s a great question, and one many investors consider. While "hard money" and "private money" are often used interchangeably, there are subtle differences:

Hard Money Loans: Typically offered by established companies or groups of investors. These loans are secured by real estate and have higher interest rates and shorter terms. They focus more on the property's value rather than the borrower's creditworthiness. Hard money loans are often used for flips due to their quick approval and funding process.

Private Money Loans: These are sourced from individual private investors or informal networks, such as friends, family, or acquaintances. The terms can be more flexible and negotiable since they are not bound by institutional lending criteria. Rates and terms vary widely based on the relationship and agreement between the lender and borrower.

Comparison:

Interest Rates and Fees: Both can be high, but private money might offer more favorable terms if you have a good relationship with the lender.
Approval and Flexibility: Private money can be more flexible and tailored to your needs, while hard money has standardized criteria.
Source: Hard money comes from companies; private money comes from individuals.

Your business partner’s model has worked well, but diversifying your financing sources is smart. Both private and hard money loans have their place, and neither is inherently for "suckers." It’s about finding what fits your needs best. If you're curious about learning about hard money feel free to DM me.

This is a pretty solid comment.
I would also add that private money is not as readily available compared to a hard money loan. The terms may also be not as competitive compared to a traditional institutional hard money loan, since there is more risk and less funding readily available from individual private money lenders. Most private money terms I have seen are anywhere from 50-65% LTV Rates anywhere from 9.5-10.5% with little if any documentation required.
Institutional Hard Money lenders have a lot more credit exposure, since there are banks, hedge funds, and corporations backing the funding. You can get away with putting 10% down and having 100% of the renovations financed since there is a bigger pool of investors willing to buy the note and funding is much more available. The drawback is more paperwork, guideline restrictions, and may require higher credit scores.
the other main issue with small or true private money lenders is they may say yes and then say no at the end.. their wife may kill the deal.. etc etc.
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Anderson S.Business Member
Lender · Brooklyn, NY · Member since 2024 · 209 posts · 50 votes
2y
Quote from @Jay Hinrichs:
Quote from @Erik Estrada:

Quote from @Anderson S.:

Quote from @Josh H.:

Good Morning BP Community,
Is Hard Money really for suckers?

My wife and I have done about 30 flips over the past few years, typically with a partner of ours that has a good amount of cash which he invests, then we split the profit. He has also invested like this with us on a couple of high-producing STR beach houses (that net each of us around 70K per house each year). We do all of the work and management, he invests the down payment and improvements (20%, plus improvements), we get the DSCR loan in our name (80%), we split the profits. Each house is set up in an LLC.

Before we started working with our partner, we did a couple of hard money loans for flips, which went fine. We really like our business partner and want to keep working with him, but we don't want to keep going to him for every deal that we have and use up all of his cash. He really likes us and has a hard time saying no to us, I am exploring alternative sources for financing some of our flips and STRs.

I saw an ad for PrivateMoney.com - the Headline says Hard Money is for suckers. Is it? Has anyone worked with PrivateMoney.com or a similar service? Is it better than Hard Money loans?
Hi Josh,

It’s a great question, and one many investors consider. While "hard money" and "private money" are often used interchangeably, there are subtle differences:

Hard Money Loans: Typically offered by established companies or groups of investors. These loans are secured by real estate and have higher interest rates and shorter terms. They focus more on the property's value rather than the borrower's creditworthiness. Hard money loans are often used for flips due to their quick approval and funding process.

Private Money Loans: These are sourced from individual private investors or informal networks, such as friends, family, or acquaintances. The terms can be more flexible and negotiable since they are not bound by institutional lending criteria. Rates and terms vary widely based on the relationship and agreement between the lender and borrower.

Comparison:

Interest Rates and Fees: Both can be high, but private money might offer more favorable terms if you have a good relationship with the lender.
Approval and Flexibility: Private money can be more flexible and tailored to your needs, while hard money has standardized criteria.
Source: Hard money comes from companies; private money comes from individuals.

Your business partner’s model has worked well, but diversifying your financing sources is smart. Both private and hard money loans have their place, and neither is inherently for "suckers." It’s about finding what fits your needs best. If you're curious about learning about hard money feel free to DM me.

This is a pretty solid comment.
I would also add that private money is not as readily available compared to a hard money loan. The terms may also be not as competitive compared to a traditional institutional hard money loan, since there is more risk and less funding readily available from individual private money lenders. Most private money terms I have seen are anywhere from 50-65% LTV Rates anywhere from 9.5-10.5% with little if any documentation required.
Institutional Hard Money lenders have a lot more credit exposure, since there are banks, hedge funds, and corporations backing the funding. You can get away with putting 10% down and having 100% of the renovations financed since there is a bigger pool of investors willing to buy the note and funding is much more available. The drawback is more paperwork, guideline restrictions, and may require higher credit scores.

the other main issue with small or true private money lenders is they may say yes and then say no at the end.. their wife may kill the deal.. etc etc.
Ultimately that is the big difference between hard money and private!
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Andres Garcia
FL · Member since 2024 · 16 posts · 5 votes
2y
PrivateMoney.com is a lead generation service.

They turn around and sell your infomation to guys like me for around 100 bucks a lead.

"Hard Money is for suckers" is copywriting designed for you to want to get in touch and put in a loan request so they can sell your info to me and I can hopefully close your deal.

In my marketing, I often use "Hard Money" as a blanket term for Real Estate Investors because its a widely know term, thought its rarely understood.

There is good and bad to all things, including Hard Money vs Private Investor...

It seems like you're giving up half your profit.

I would think its worth paying a a bit of a higher rate and being able to keep 100% of the profit on some of your deals.

I am happy to discuss further.
0 Reply
JC Coskun
Developer · Washington, DC · Member since 2023 · 41 posts · 6 votes
2y
With many experienced lenders, loan officers here, I have a question. I was approached by a client of mine to fund their investment of 400K. They offered to pay 10% interest on this loan. Is this a good deal for a private lender type of transaction? Disclosure: I am their real estate agent as well and the deal is good.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @JC Coskun:

With many experienced lenders, loan officers here, I have a question. I was approached by a client of mine to fund their investment of 400K. They offered to pay 10% interest on this loan. Is this a good deal for a private lender type of transaction? Disclosure: I am their real estate agent as well and the deal is good.

private money goes for 10 to 15% plus points.. just depends on LTV borrower and do you want to give the guy a deal or not.. maybe you get a touch of upside ?
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JC Coskun
Developer · Washington, DC · Member since 2023 · 41 posts · 6 votes
2y
Quote from @Jay Hinrichs:

Quote from @JC Coskun:

With many experienced lenders, loan officers here, I have a question. I was approached by a client of mine to fund their investment of 400K. They offered to pay 10% interest on this loan. Is this a good deal for a private lender type of transaction? Disclosure: I am their real estate agent as well and the deal is good.

private money goes for 10 to 15% plus points.. just depends on LTV borrower and do you want to give the guy a deal or not.. maybe you get a touch of upside ?

I'll represent them on buying as well as selling multiple units so there's definitely that as the upside. Purchase price is 600K, I'd finance 400K for 1 year with a possible extension. I could do 11% and no points, is that reasonable? To follow up, what are the HML rates for this type of loans?

0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @JC Coskun:

Quote from @Jay Hinrichs:

Quote from @JC Coskun:

With many experienced lenders, loan officers here, I have a question. I was approached by a client of mine to fund their investment of 400K. They offered to pay 10% interest on this loan. Is this a good deal for a private lender type of transaction? Disclosure: I am their real estate agent as well and the deal is good.

private money goes for 10 to 15% plus points.. just depends on LTV borrower and do you want to give the guy a deal or not.. maybe you get a touch of upside ?

I'll represent them on buying as well as selling multiple units so there's definitely that as the upside. Purchase price is 600K, I'd finance 400K for 1 year with a possible extension. I could do 11% and no points, is that reasonable? To follow up, what are the HML rates for this type of loans?

HML rates vary by location around the country.. by and large the cheapest rates are CA. East coast gets higher normally because of foreclosure risk.. not the risk of foreclosure per se but if you have to in some states it can take years.

A fair deal would be 2 points and 11% most HML right now their best rates are about that.
And keep in mind on BP you have a ton of Brokers who have to add fee's to the HML rates.. although company like Kiavi offers Brokers par pricing IE they charge no points but other lenders will be 2 points and the brokers have to add a point or two to the top..
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Jennifer Long Brenner
Member since 2021 · 4 posts · 1 vote
2y
Quote from @Jesse Tomlin:

Quote from @Josh H.:

Good Morning BP Community,
Is Hard Money really for suckers?

My wife and I have done about 30 flips over the past few years, typically with a partner of ours that has a good amount of cash which he invests, then we split the profit. He has also invested like this with us on a couple of high-producing STR beach houses (that net each of us around 70K per house each year). We do all of the work and management, he invests the down payment and improvements (20%, plus improvements), we get the DSCR loan in our name (80%), we split the profits. Each house is set up in an LLC.

Before we started working with our partner, we did a couple of hard money loans for flips, which went fine. We really like our business partner and want to keep working with him, but we don't want to keep going to him for every deal that we have and use up all of his cash. He really likes us and has a hard time saying no to us, I am exploring alternative sources for financing some of our flips and STRs.

I saw an ad for PrivateMoney.com - the Headline says Hard Money is for suckers. Is it? Has anyone worked with PrivateMoney.com or a similar service? Is it better than Hard Money loans?

Hi Josh,
I'm interested in structuring a deal with an investor much like you mentioned in your post. Do you split the profits 50/50 or does it vary deal to deal? I've never entered into a real estate partnership and would like to make it a win win for everyone involved. Thanks in advance.
I'm interested in this as well! I’m planning on purchasing a small SFH from a private lender. No $ down. Im borrowing from a friend (and biz partner) and wanna be sure this is a win win. What are typical terms for this kind of private loan?
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