Hard Money Lenders vs Private Lenders

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
1y

private are just that usually someone you know that wants to use IRA funds.. does not do it for a living etc.

HML is a business many call themselves PML to give the illusion that their rates could be lower or qualifying is easier.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    1y

    private are just that usually someone you know that wants to use IRA funds.. does not do it for a living etc.

    HML is a business many call themselves PML to give the illusion that their rates could be lower or qualifying is easier.

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  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    1y

    Private money is just loans that come from individuals through relationships that you have. 

    Hard Money is loaned to you by a business who goes out and find those funds for you, they have a group of investors who trust them to loan out their money in safe investments that turn quickly. They have their own underwriting criteria and a fiduciary duty to their investors. 

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1y
    Quote from @Havan Surat:

    I am wondering what are the differences, if any, between private lenders and hard money lenders in funding flip/ BRRRR projects?


     There are really three types of lenders:

    1. Investor Loans - These are underwritten per institutional standards (LTV, LTC, location and credit). You can get for a BRRR project rates between 9-11% depending on factors.

    2. Private Lender - individual who lends money, may do little underwriting focused on deal. Could also be a friend or family. Typically an individual.

    3. Hard Money - Highest interest rate loan typically 12%+ for newer investors or loans that do not meet the criteria of item #1.

    If you do not have a friend or family member, I recommned starting at #1 to see if you qualify then move on to #3 worst case.

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  • Jeff S.
    Lender · Los Angeles, CA · Member since 2009 · 1k+ posts · 2k+ votes
    1y

    Hard Money Lender = Private Money Lender = Bridge Lender = Residential Transitional Lender (RTL, the latest fad term).

    Unlike government-sponsored loans, such as those through Freddie Mac and Fannie Mae, there are no consistent criteria among these loans. Traditionally, they are for properties that need renovation, with 6 to 24-month terms, primarily based on the property and the ARV, with a secondary focus on borrower qualifications.

    Some argue that hard money lenders are licensed professionals, while private money lenders are like your mom or dentist who lend their own money. This view overlooks bridge and RTL loans — terms used less often.

    In reality, there's so much overlap that it’s silly to differentiate. For example, we are licensed, market ourselves, and lend our own money, including from our retirement account. How would you define us? What box do we fit in?

    Strangely, some get emotional and feel strongly about this, but most lenders don’t care what you call them. Feel free to use these terms interchangeably. Everyone will know what you mean.

    1Reply
  • Erik EstradaBusiness Member
    Lender · Los Angeles, CA · Member since 2022 · 7k+ posts · 1k+ votes
    1y
    Quote from @Havan Surat:

    I am wondering what are the differences, if any, between private lenders and hard money lenders in funding flip/ BRRRR projects?


     Hard Money Lenders generally follow cookie cutter guidelines to ensure repayment of the loan. They may or may not require an appraisal and can generally lend at a higher leverage since they have larger credit lines. 

    Private money lending is your typical mom and pop, family, or pool of investors that create their own notes and will have a common sense approach to lending. You will not really see private lenders do 100% financing, but they can do a 2-3 day close since funding is readily available and you won't be going through the scrutiny of underwriting. You can probably anticipate a 65% LTV max with this kind of lenders, and a lot more creative financing options.

    Some private lenders provide gap funding and could request repayment in the form of equity instead of your traditional points and rate. 

    What I see most commonly is newer investors trying to get 100% financing with no track record or any form of confidence that the loan will be fully repaid. Sometimes you just have to think, would I trust someone with $500k with no skin in the game or history to show that they will repay me? 

    You could also look into outside JV partners for funding. You will set up an agreement with an investor for funding and in return they will be repaid X amount without necessarily being directly involved in your company. But be expected to repay even if your exit does not go as planned..

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  • Frankie VozziBusiness Member
    Member since 2025 · 392 posts · 99 votes
    1y

    Hey Havan, A lot of investors I work with start out thinking they’re the same, but once you’re running multiple projects or BRRRRs, the right structure can make a big difference in both cash flow and speed. I sent you a Dm, Let's connect!

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  • Christopher Sparacino
    New to Real Estate · Sarasota, FL · Member since 2018 · 82 posts · 49 votes
    1y

    is it possible for someone to lend you money to fund a househack? how would that work?

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    • Deborah Wodell
      Lender · Sanford, NC · Member since 2024 · 359 posts · 123 votes
      1y
      Quote from @Christopher Sparacino:

      is it possible for someone to lend you money to fund a househack? how would that work?

      it’s definitely possible, but how it’s structured really depends on the lender and your situation. Most private or hard money lenders focus on investment properties, so if you’re planning to live in part of the house (like a duplex or triplex), that makes it a bit different since it’s considered owner-occupied. And only a select few do those. 

      You could explore options like a conventional or FHA loan for a house hack where you live in one unit and rent the others.

      Private funding from an investor or partner who gets equity or interest in return, but that would usually be a private agreement, not a traditional loan.

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