Private Money Lending

Private Money Lending is different than Hard Money Lending.

Hard Money Lenders are larger with a larger pool of money to lend. This could be many millions of dollars, from dozens of individuals and entities. They are much smaller than banks, but large enough to be required to meet certain legal, organizational and regulatory requirements, as set forth by the State(s) of operation.

Private Money Lenders are smaller than Hard Money Lenders. Their pool of money may be from a single individual or a small group of family and friends. They purposely stay small enough to avoid all the legal, organizational and regulatory requirements.

This does not mean they can lend at the rate they choose. That is determined by the State of operation regardless of the lenders size.

Having a Private Lender is like having a personal banker. They are much easier to contact then the typical Hard Money Lender and more personable. As a result they fund your purchases faster and can be more flexible than the bigger lenders.

Many Hard Money Lenders are under pressure to lend their money. This is because many must pay interest on their pool of money whether they loan it or not. Because of this, they are in the field constantly searching for the next deal. They need to keep the pool of money accumulating interest through loans.

Private Money Lending is more leisurely. An individual wants to loan their money, but it's not a must.

Your credit rating is generally not a big deal, if your deals meet their parameters. However, your credit must be good enough to refinance out of their money, so they can recycle it. They also like to stay in the 65-70%LTV range or less.

The main benefit is the flexibility. It is difficult to explain the importance on this website. You really must do a few deals to understand the true value of flexibility.

I have closed deals where the borrower, lender and seller were in different States. It may be possible with other lenders, but not likely. Situations like this are less of an issue with a Private Lender.

If you ever develop a relationship with someone involved in Private Lending, take very good care of them.

If a deal does not work out the way you anticipated, make sure the Private Lender receives their expected return, no matter what. Even if it means you break even or lose a little money.

They will fund your deals for life, knowing you will protect their money.

Private Lenders will also, occasionally advertise in the Real Estate section of the Sunday Paper. You will receive other tips on locating both Hard Money and Private Money Lenders in the next segment.

By the way, it is said there is more Private and Hard Money available, then there is conventional bank money.


From Private Money Lending back to Investment Property Financing.