Difference between HML, Equity Parter, and Private money

3 Replies

Hello,

I am a new to the game and I am trying to wrap my head around some of the terms I see used a lot on these forums. I would like to know the difference between hard money lenders, equity partners, and private money. To me, it sounds like these are very similar ways to receive money for deals without going the conventional route of getting a mortgage. Are the deals structured differently between the three, or what are the main differences?

Thanks

Braden

@Braden Schlabs

hard money is like a bank. High interest and high points with a lot of requirements and you have to front the cash and then be reimbursed usually. Private money is just high interest but usually covers purchase and rehab with first position of the title. Equity partners provide all the money and you do all the work and they take 50% usually. 

Originally posted by @Sean Carroll :

@Braden Schlabs

hard money is like a bank. High interest and high points with a lot of requirements and you have to front the cash and then be reimbursed usually. Private money is just high interest but usually covers purchase and rehab with first position of the title. Equity partners provide all the money and you do all the work and they take 50% usually. 

Thanks for the clarification. So if a prospective investor would like to get into real estate as a cash partner, what are the pros and cons of each method? In the explanation you gave above, it seems that it would be more secure to invest as private money lender as you can take back the property if they are unable to keep up with interest payments. What type of return does a typical private money lender receive? For someone who is considering becoming a cash partner and is relatively new to the world of real estate which would you say is the better route?

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