What Is Hard Money?
Hard money loans are short-term, asset-based loans provided by professional lending companies. They're called "hard money" because they're secured by hard assets (real estate) rather than the borrower's creditworthiness. Hard money lenders like Kiavi and New Silver operate at scale, with standardized underwriting and fast closing timelines.
Typical hard money terms: 10–13% interest rate, 1–3 points, 12-month term, 70–90% LTC, close in 7–14 days.
What Is Private Money?
Private money comes from individual investors — friends, family, colleagues, or high-net-worth individuals who lend their personal capital in exchange for a return. The terms are negotiated directly between borrower and lender, which means they can be far more flexible than hard money.
Typical private money terms: 8–12% interest rate, 0–1 points, 6–24 month term, negotiable LTV, close in days (if the relationship is established).
Key Differences
| Factor | Hard Money | Private Money |
|---|---|---|
| Source | Professional lending company | Individual investor |
| Rate | 10–13% | 8–12% (negotiable) |
| Points | 1–3 | 0–1 |
| Speed | 7–14 days | Days (if relationship exists) |
| Flexibility | Standardized terms | Highly flexible |
| Relationship | Transactional | Personal |
| Availability | Always available (if you qualify) | Depends on your network |
When to Use Hard Money
Hard money is the right choice when you need reliable, fast capital and don't yet have a private money network. It's also better for larger deals where the loan amount exceeds what a single private lender can provide.
When to Use Private Money
Private money shines when you have an established relationship with a lender who trusts your track record. The lower rates and points can add $5,000–$15,000 to your profit on a typical flip. It's also more flexible — private lenders can often fund deals that hard money lenders won't touch.
Building Your Private Money Network
The best time to build a private money network is before you need it. Attend local REIA meetings, talk to your accountant and attorney about their clients who might be interested in real estate returns, and always be transparent about your track record and deal structure.