| One of the first things people looking to start | | | | for very short-term needs or if a situation comes up |
| investing in real estate generally ask about is how to | | | | without any readily available alternatives. |
| find investors, or how to generate the capital to do | | | | Private Money |
| their deals. While a traditional bank or mortgage | | | | Private money, just as it sounds, is money you can |
| lender can be of some help, most real estate | | | | obtain from private individuals for real estate |
| investment companies today use other options for | | | | investment funding purposes. Private money can be |
| funding. Two of these options are known in the | | | | obtained in a variety of ways, and can be a much |
| business as "hard money" and "private money." | | | | better deal than using hard money. The biggest |
| Hard Money | | | | advantage of private money is the lower cost than |
| In real estate investment, the term "hard money" | | | | hard money, and the added flexibility of working with |
| refers to a short-term loan which is used to finance a | | | | investors who come to know you and understand |
| property. Hard money gets its name from the fact | | | | your business. |
| that these type of loans are very expensive for the | | | | Finding private money lenders requires prospecting |
| borrower and yet also very advantageous for the | | | | for investors. When you enter the arena of real |
| lender. For real estate investment transactions, hard | | | | estate investing, prospecting for investors needs to |
| money lenders will generally only loan on properties | | | | be something you do on a regular basis in order to |
| up to 65% loan-to-value and will charge an interest | | | | insure that you always have the capital readily |
| rate well above the current standard mortgage rates. | | | | available to fund your deals. Finding the right real |
| The reason for the high cost of obtaining hard | | | | estate investors means that you can make the best |
| money is that it is much easier to borrow, and | | | | deals possible, and you can make them on your own |
| because of this the lender is placed in a position with | | | | terms rather than the terms of a bank or a hard |
| much more risk of default. Hard money can be good | | | | money lender. |