Hard Money vs. Private Money by gyvwpsjkko


									?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.
So what about the Terms of Use?
Private Money the terms of use with private money tend to favor that of the real estate
investor. Why? Because you as the investor set the terms exactly how you want. You
go to the investor and they agree to give you X amount of money and in exchange
they will be paid X% return. You can structure this so they receive a monthly return
exactly like any lending institution structures a basic mortgage or you may want to
give a higher percentage and pay the investor in one lump sum at the close of the deal.
However you slice it, you decide where to spend the money, when to spend the money,
and how to spend the money. But you do need to have your business set up so that a
third party holds the money until you are ready to use the money. The best part about
using private money is you determine what is done with the money because you are
the real estate investor, you don't have the private money investor watching over your
shoulder. In fact, if using private money I would not even let the private money
investor look at the deal. They are not real estate investors rather they are simply your
financial backing.
Hard Money: with hard money the deal favors the hard money investor. The hard
money investor lays down the terms of the deal. Everything from the percentage of
return they will make to the type of deal you can do with the money. If the hard
money investor wants you to do a rehab and then flip the house, well that is exactly
what you will have to do. There is nothing wrong with this scenario if you can get a
better deal as a real estate investor is and are confident that you will be able to meet
the terms of the hard money investor. Hard money does have its advantages and can
be more useful depending on the deal but it is in each specific circumstance, which
you will have to determine which type of deal is better for you, the real estate investor.
When working with a hard money investor it is always important that you have them
sign some sort of agreement so you do not get taken advantage of. For example, if you
discover a great investment opportunity and approach your hard money investor, it is
very easy for them to go around your back and make the deal happen while you are
left out in the cold.
Finally, both types of scenarios are very favorable for all parties involved. If a real
estate investor can offer the person who is tired of investing in stocks and bonds and
the volatility of the stock market a way to make more of a return, they will jump at the
opportunity. You will most likely start off slow but once you prove yourself to that
money investor, they will be more inclined to give you money a second and third time
down the road, and they will often be willing to give you more money so you can do
bigger deals. Just always be careful that everything thing is done within the confines
of the laws in your area and that you cover your interest in each deal with good
To find out more about using private money for investing and other real estate
investing techniques that can increase your returns and help you grow your
business.Did you find this article useful? For more useful tips and hints, points to
ponder and keep in mind, techniques, and insights pertaining to Internet Business, do
please browse for more information at our websites.

To top