Hard money or Private money longest terms?

Question

After doing some research on real estate financing, I've come across inconsistent information regarding the longest hard money or private lenders will do loans for. Therefore my question is this, what are average yet longest terms(in years) for hard money and private lender loans?

Matt B. · Answer

We have used both hard money and private, but definitely prefer private. With hard money the lender sets the terms(interest, length,so forth). With private money you set the terms.

As @Jeff S alluded, you need to be careful with family and friends. With private money you have a fiduciary responsibility for your investors. With hard money the lenders know the risk(not that you are not off the hook if a deal goes sour.)

With private money you have a great deal more responsibility. If you do use private funds, it is your responsibility both ethically and legally to educate your investors to the risks involved. You should not be taking any investors in, that can't afford to lose it.

That being said, if your friends and family have the resources, know the risks and believe in you they can make excellent investors.

Much success.

Anthony Dadlani · Answer

Every lender would be different. Most lenders offer 6 months to 12 months. Our program offers six months max. Best of luck in all your endeavors.

Ann Bellamy · Answer

I agree with Jeff S

@Jeff S undefined

Also, for general info on hard money, I did a BP podcast on the topic, which may be helpful.  But in general you want to stay local for hard money for many reasons.

Jeff S. · Answer

Unless they have real estate experience, Rodney, I do not suggest you approach family and friends.  As a beginner, with no experience of your own, this is the place you want to surround yourself with experts.  You’ll pay more for the advice, until you get your feet wet, but it will help tilt the deck in your favor.  Further, you’ll want to borrow as locally as you can to find those knowledgeable about your area, and perhaps even your specific deals.

You can find lenders here on BP, as Ian noted above.  In my view, the best place to find potential lenders is at a local REI club.  You’ll often see the same people at a good REI club and learn who are doing deals, who are not, why, and where.  REI clubs tend to provide a neutral, no pressure environment you can use to develop the long-term relationships you need in this business.  Meetup.com is a good place to start and it looks like you have many options to choose from in the Tampa area.  Good luck.

Jeff

Ian M. · Answer

@Rodney Dixon click on the resources tab in the blue line at the top of the page and you will see a link for hard money resources.  As far as "private money" that is something you develop with your own network - family, friends, colleagues, etc.. thus "private money" - i.e. money that is not necessarily "publicly" available (like a bank).

Rodney Dixon · Answer

Thanks Jeff & William for the information. In addition to your help thus far, do either of you know some resources(maybe here at BP) on hard money & private money lenders?

My goal is to add to my present knowledge about these forms of money as much as I can!

Jeff S. · Answer

It all inconsistent Rodney, because hard and private money lenders create their own terms to meet their local demand. At the interest most charge, 6 months to a year is typically the maximum, and the longest you’d want to pay anyway. You could get lucky and find someone who loans their own money and is willing to lock in a relatively low interest rate for a longer term.

There are some lenders I’m aware of doing longer term buy and hold and construction money at rates slightly below the market, but these tend to be the exception than the rule.

Jeff

William Robison · Answer

@Rodney Dixon

Hard money loans are very rarely measured in years.  Hard money loans are high cost sources of financing that provide short term solutions for properties that do not yet meet other available funding source criteria.  For example, buy with HM, rehab, then refi with conventional financing.

Private lending is private for the reasons by design.  Depending upon your cost of money, you may keep private lending in place for the long term, or just use it in a similar fashion to a hard money loan.

Typically, but not always, private money sources can cost less than hard money.

Hope that helps.

Hard money or Private money longest terms?

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