How is Private Money Different from Hard Money?

What’s the difference between private money lenders and hard money lenders?

There is practically no difference. Private money lenders can be hard money lenders and vice versa. In general, all hard money loans (sometimes called “hard cash loans”) originate from private money sources.

What is private lending?

Any loan that isn’t made by a bank is considered private. “Private lending” can refer to an individual private lender or a group of lenders operating under a business entity. Private, non-homestead loans are relatively unregulated compared to bank loans, so there’s a lot of misunderstanding about the difference between private money and hard money lenders. They’re really just different terms for the same thing.

What is hard money lending?

Hard money, hard cash and private money are basically interchangeable terms but in practical use, “private loan” typically implies a lower rate than “hard money loan or hard cash loan.” Some hard money lenders are funds (groups of private lenders) and others are individual lenders. Both set their own rates, terms and types of property they’re willing to lend on. Hard money lenders are almost always asset-based lenders more concerned with property value than a borrower’s creditworthiness.

How a true hard money lender works

There IS a difference between a true DIRECT hard money lender and others. Little City Investments is a true, direct hard money lender with funds available. As a direct lender, we lend our own funds on Texas real estate. We don’t have to submit your request to anyone else and we make loan decisions extremely quickly, typically within three days. Your loan request is not subject to a dreaded underwriter or loan committee. We prioritize the value of the property, not your credit or cash flow. 

Should I purchase a list of hard money lenders?

There are lists of private and hard money lenders available for purchase or by subscription, but you shouldn’t need to pay for a list to find a hard money lender. Buying a list might sound convenient, but real, local hard money lenders don’t need to pay to be included on these lists. National hard money lenders might be able to fund your deal, but they also might take significantly longer to make a decision and get to the closing table.

The hard part about being a real estate investor is finding the deal. If you get a great deal under contract, finding the funding should be the easy part. Fortunately, when you find an excellent value, the cost of the money is far less important than the availability and speed of the transaction.

Some lenders lend at lower rates than others, but be wary of a list that claims to have lenders offering investor loans lower than 8%. In general it’s not worth the risk or trouble for lenders to make hard money loans to investors (except possibly friends and family) at less than 8%.

At Little City Investments we provide direct hard money loans to real estate investors in Austin, Houston, San Antonio, and Dallas. We’ve been in the business for over 10 years, and we have what it takes to get your deal done. Request a loan today.