Traditional Private Lending

[Tammy White]

I post a lot about private lending, and one thing I've noticed is that the terms Private Money and Hard Money often mean different things to different people.

Here's my perspective.

Many people who work for lending companies refer to themselves as private lenders. They may be lending private capital, but the business often operates much like a traditional lending institution.

There are underwriting guidelines, borrower qualifications, internal policies, approval processes, and lending criteria that every borrower must fit into.

Those companies provide an important service and play a valuable role in the real estate lending industry. They can often structure creative financing solutions that help borrowers get funding they might not otherwise be able to obtain.

But when I think of **individual private money**, I think of everyday people using their own money.

A retired school teacher. A nurse. A firefighter. An accountant. A small business owner. Your neighbor. Your friend. Someone who has worked hard, built savings, or accumulated funds in a self-directed IRA and wants to put that money to work through real estate-secured lending.

The difference isn't simply where the money comes from.

It's how the lending decisions are made.

Individual Private Money isn't driven by a structured set of lending guidelines. It's driven by the quality of the opportunity.

Is the deal well structured? Is there enough equity? Does the borrower have the experience to execute the plan? Is there a realistic exit strategy?

Those are the questions an individual private money lender asks.

I'm a private money lender myself, and I genuinely enjoy meeting others like me.

When you think of private money, what comes to mind?

[Jay Hinrichs]

Quote from @Shiloh Lundahl:

Hi @Tammy White. I've been investing for 16 years and have had hundreds of loans. I would say simply that the difference between a hard money lender and a private money lender is that the hard money lender is a professional lender and the private money lender is not.  The hard money lender makes a significant source of their income from loans. They have their own documents and they have predetermined lending guidelines.  A private money lender usually doesn't not have their own documents since they don't lender very often and lending is not a primary source of their income. They don't have a predetermined set of lending guidelines to determine if they will lend or not. 

My guess is you say you are a private money lender but I am guessing you act more like a hard money lender in that you have your own lending documents and your own lending guideline. Am I wrong?

and anyone who holds themselves out as a lender on a Social Media or any other media is a HML not a true private money lender.. many HML try to disguise themselves as private like this thread but they are not.. The fact that they are making a post and publicly telling someone they are a lender disqualifies them from the True definition of a private money lender at least in the eyes of those who are looking for those private folks that do not do this for a living or do not advertise in any way shape or form.