All Money Ain’t Equal: Private vs. Hard Money for Investors
You don’t need all the money—just the right kind.
In real estate, everyone wants to talk about “using other people’s money.”
But whose money?
And at what cost?
Two of the most common ways investors fund deals are through private money and hard money.
They sound similar—but they’re not interchangeable.
Use the wrong one for the wrong deal, and your profit margin might vanish faster than your contractor on demo day.
💼 First: Let’s Define the Two
🏦 Hard Money
A licensed lending company or broker that loans money short-term for real estate projects—usually secured by the property itself.
They’re fast. They’re expensive. And they don’t care about your cousin’s bar mitzvah—just your deal and your equity.
👥 Private Money
An individual (not a bank) who lends you money—usually based on trust, a solid return, and a clear plan.
Think: friends, family, a retired investor, or a doctor with cash in a self-directed IRA who wants passive income without managing toilets.
📊 Hard Money vs. Private Money—Deep Dive
| Feature | Hard Money | Private Money |
|---|---|---|
| Source | Institutional, licensed lender | Individuals (friends, family, peers, pros) |
| Approval Time | Fast (5–14 days), but requires application | Extremely fast (sometimes 24 hours) |
| Credit Check | Often required | Rarely required |
| Property-Based? | Yes—LTV and ARV matter most | Sometimes—can be relationship/trust-based |
| Points & Fees | 2–4 points + closing fees | Typically zero to 1 point (negotiable) |
| Rates | 9–15%+ | 6–12% average |
| Term Length | Short (6–12 months) | Varies—often more flexible |
| Creative Friendly? | Nope—conventional, clean deals only | Yup—perfect for SubTo, wraps, seller finance |
| Risk of Default | High—balloon payments, strict terms | Depends on the relationship and structure |
💡 Strategic Use Case Breakdown
🛠️ Fix & Flip
Best Tool: Hard Money
You’re in, out, and done. If the numbers work and your contractor delivers, it’s worth the points and higher interest.
BUT: Build a private lender network to scale without getting fee-fatigued.
🔁 BRRRR
Best Tool: Private Money
Hard money can get risky if refi delays. Private lenders often give you breathing room until you stabilize the property.
🧍♀️ Buy & Hold Rentals
Best Tool: Private Money
Hard money doesn’t work long-term. Private money bridges the gap to a DSCR loan or long-term conventional financing.
💡 Creative Acquisitions (SubTo, Wraps, Lease Options)
Best Tool: Private Money
No bank or hard money lender wants to fund a Subject-To. But a private lender who understands your plan? That’s gold.
🏨 Mid-Term Rentals / Short-Term Rentals
Best Tool: A mix
Hard money for acquisition and fast rehab. Private money for furnishing, reserves, or holding.
🧠 Pro Tips to Work Both Like a Pro
💬 For Hard Money:
- Know your numbers cold (ARV, repair budget, LTV, exit strategy).
- Expect inspections, appraisals, and underwriting.
- Budget for points, fees, interest, AND holding costs.
- Ask: What happens if the project takes longer than expected?
💬 For Private Money:
- Lead with clarity, not desperation. Show a simple return + exit plan.
- Put everything in writing—yes, even if it’s your uncle.
- Offer interest or equity—not both unless it’s a JV.
- Show credibility (even if it’s borrowed—hello, community + education!).
🧨 Common Rookie Mistakes
🚫 Using hard money for a long-term rental.
🚫 Pitching a creative deal to a hard money lender.
🚫 Not vetting your lender’s history and credibility.
🚫 Overpromising to private lenders with no clear exit.
🚫 Thinking “private” = “free money.” (It’s not—it’s still a business deal.)
🎯 Bottom Line
Hard money is a tool. So is private money.
The skill is knowing which tool to use when—and how to use it safely.
💡 Use hard money when the deal is fast, clean, and has a clear end.
💡 Use private money when the deal is creative, messy, or needs room to breathe.
Funding your deal doesn’t have to be scary.
You just need to understand your options, run your numbers, and protect everyone involved—including yourself.
🚀 Want to Learn How to Raise Capital Like a Pro?
Join our next free intro session and we’ll show you:
- How our investors raise private money (even on their first deal)
- What hard money lenders want to see before they say yes
- How to structure win-win deals that make people want to fund you
🧠 Learn to fund deals without begging—or blowing your budget.
You bring the strategy.
We’ll help you bring the capital.
