Hard Money versus Crowdfunding

3 Replies

Hey Steven,

   A lot is determined by how fast you need to close, what type of property your looking to purchase, how much of a headache do you want with numerous multiple investors from crowding funding, how would you structure the Deals and the proceeds from the house. 

   Hard Money allows you to be more in control of the process and a clear outlook on profits and cost.

All in all, when determining which course to take, make sure you do your homework and know your math

First you need to confirm if you'll qualify on crowdfunding platforms. They have tougher criteria than hard money lenders when it comes to track records and owner's credit and capabilities. Hard money lenders will usually just go by the ARV or LTV and minimum credit score. Crowdfunding you might be able to get away with 10% "skin in the game" or capital contribution whereas some hard money lenders will require you to invest 30% of the purchase price.

What was mentioned above regarding multiple investors is not always the case. Most crowdfunding platforms will simply issue a loan similar to any lender and they deal with investors. If they structure it equity, then you will have one investor LLC invest in your LLC so you only deal with the one person.

There are few if any crowdfunding platforms producing the returns they promise. You are better off going to a hard money lender or private money broker. Yes the rates are higher but they're legit and have a vested interest in being transparent and upfront with you.