Question about Private money, Hard money and the Bank =)

[Michael Bishay]

Hello all,

I had a question about a strategy I see all over the internet where people raise money from a "Private lender" form the down payment on a property and then the rest they raise either from the bank or from a hard money person.

Are there really people that lend the initial finds for a property? Why would they be incentives to do that being that it would only be like 10-20% of total cost?

Am I understanding this correctly?

Sorry for the novice question, I'm still new to this game and this site has bees super helpful!

[Eric Boshart]

Yes some do it in exchange for equity upside, almost like a JV, or charge a very high interest rate for a second lien on the property. Usually the private lender is someone either looking to be opportunistic or knows the borrower very well (family, friend, etc). As a borrower I'd be careful not to over-lever in this environment.