photo credit: Barnaby
Before we go any further, let’s make sure we’re working from the same definition of hard money business loans.
For the purposes of this discussion, hard money business loans and hard money loans in general, are typically secured by real estate.
Because the lender is not usually concerned with the application of the funds acquired, I’m further defining a hard money business loan as a source of funds invested into a business operation.
The lending criteria for issuing a hard money loan is primarily focused on the equity held in real estate.
Typical characteristics: 1) private lending sources, 2) short interest terms from one to three years, 3) up front fees on closing, 4) short in duration, 5) use of funds not a focus, 6) limited number of debt covenants if any, 7) interest only payments is quite common, 8 failure to pay results in sale assets to retire the debt. Read the rest of this entry »
photo credit: stevendamron
I interview real estate investors for my website and recently I came across a number of investors who teach about using private money to purchase real estate. However, if you would have asked me one (1) year ago about the difference between private money and hard money I would not have been able to tell you anything. The difference however is very critical.
Broken down into its simplest form the main difference is with private money you decide the terms of use and with hard money the lender decides the terms of use. Now this very basic difference has a lot of impact on your real estate investing business. One type of money is not necessarily better than the other but you should in fact no the difference.
Where does the money come from?
In both scenarios you are going to receive the money from an outside investor. There are several ways to discover these investors from holding luncheons to running ads in the local paper. The investors know that real estate will offer a higher return than the market so they are inclined to give you some dollar amount in exchange for a percentage of return. Read the rest of this entry »
