Bank loan or Hard/Private money loan?

2 Replies

Hello all!

I am a long time listener of the BiggerPockets Podcast but I have yet to use the forums. That being said, I hope this is in an appropriate category. I appreciate any input and thank you for your time! Here is the situation:

My business partner and I are in the works of closing on our first deal. This is an off market deal - combination of 3 properties (17 units total). This is a turnkey purchase. 15 units are filled with long term tenants that plan on staying. We don't intend on adding value or BRRRR because we are purchasing near the assessed value. We pretty much intend to take ownership and begin to collect rents.

Total Purchase price = 500k

Gross rents = 102k/annually (when fully occupied)

My main question is this:

Should we go for a loan through a bank (commercial mortgage w/20% down) or a private/hard money lender?

I know there are several ways to structure this. I'm just trying to figure out if you guys have any experience with similar situations. Any advice is greatly appreciated! 


I agree with Bob.  Since you aren't adding value and planning on keeping it longer term, then paying a lower interest rate makes more sense which in turn means better cash flow.  The hard money person will want their monies back at some point, usually within a year which would also mean you would have to refi into a longer term deal which means more cash coming out of your pocket monthly and then when you have to refi as well.  I would also be careful if you only have the 20% down and do not have cash reserves, things will go wrong its real estate, you need to have additional cash to ensure you can cover "what ifs."