Rehabber from Hartford, CT

11 Replies

Hey, I am Shay! I am 26 years old living in Hartford County, CT. I own and operate a remodeling company with my business partner. I am very interested in flipping houses and I am currently educating myself on the process. However, I am a bit unclear on the difference between a hard vs private money lender. What is the real difference? Which one is the better option? I appreciate any advice.

Welcome to BP @Shay Francis ! I find this site very educational. I'm too am new to the financing portion of REI but to answer your question the primary difference between hard money and private money is that private money tends to come from people you know while hard money comes from people who you do not know, but who are not banks. An example of private money might be money loaned to you by friends, family, or people who you may know. An example of hard money is typically an individual who you do not know, who has money to lend but who is not a bank. Their rates are typically high (12% or higher) depending on where you live, they will charge points, and your rate will largely be determined by your level of experience and how much money you contribute to the project personally.

I'll let others with more experience chime in on this.

@Shay Francis

Hard Money is generally lent from a professional lender who is in the business of making loans. The word "Hard" refers to a collateralized asset, in the case of real estate, the property serves as the collateral.

Private Money is lent from people who are generally not professional lenders. 

'Generally' the practical difference between the two types of lenders are:

HML: Typically have more narrowly defined loan terms (this can come in the forms of the percent, points, length of loan, etc.), whereas

Private Lenders: Generally have more flexible loan terms since you are arranging your financing with someone who is not in the business.

Like many things in life, they both have their advantages and disadvantages and one is not necessarily better than the other. Also, within each group finding a good HML and good private lenders are both very important.

Best of luck and hope to see you around Connecticut!

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