Why would I use crowdfunding instead of hard money?

4 Replies

Hello,

Just listen to podcast and had a thought... Why would I use crowdfunding instead of hard money. This would be for both single family and multi's. Would use a portfolio bank as my end financing (refinance) in the BRRRR. Id be using for BRRRR or holding.

Appreciate feed back.

Thanks!

they're not mutually exclusive. crowdfunding is just a different method of raising capital, and there are many different types of crowdfunding. some platforms raise it for you, others want you to list the deal, but you have to raise it yourself.

Thanks Amy. I guess Im thinking why would I use a crowdfunding company, when I could use a local hard money lender that I may know and/or can get referrals on. And where the rates are possibly comparable.

@Mary D. i think it comes down to rates, terms, and ability to close. the debt crowdfunding companies brought now the traditionally very high hard money rates in NJ, for example. Not sure about the rates in NH.

"Crowdfunding" is just a fancy name for lead generation, which may or may not include the use of the internet.  Hard money is easy to raise in most areas of the country, but is quite expensive for many project types.  The longer the duration of the project the less viable hard money will be for funding.  

One of the highest value activities investors can engage in is to learn to control their sources of capital well.  Having access to money is a core need to operate a real estate business and learning the securities laws and marketing techniques to get introductions to new funding facilities on a continuous basis sets you up for success long-term.  The most successful investors I know of are long-term greedy and think of the business as a business instead of a series of deals to cobble together with whatever money they can find on whatever terms their investors demand.  

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