Is Your Private Lender Actually Hard Money?

A loan backed by a hard asset; "Hard Money". Did you know that your private lender is actually a “Hard Money” lender? When Grandma lends you money, and you give her a Promissory Note secured by a Mortgage or Deed, that’s a Hard Money loan. This does not mean that all lenders are created equal, or that all hard money loans are the same.

Grandma is not a professional lender with the overhead of a fifty person office (or maybe she is). So Grandma is happy to receive a double digit return if you pay it, and doesn't need points to pay salaries and the electric bill. Grandma doesn't even know the meaning of the word appraisal, and "granny I promise to pay you in 6 months" works just fine for a personal guarantee. The downside is how many loans Grandma can fund...probably not many. So long as granny's loan is secured by the asset; "Hard Money".

At the other extreme are the large nationwide companies with systems, and processes, and underwriting departments. Companies with points, risk based interest rates, and construction draws (with associated fees). Professionals who can fund as many projects as you can bring them. Can Grandma fund the simultaneous purchase and renovation of 6 brownstones in Brooklyn NY? Kudos if she can, but more likely than not it's a "no". Secured by a hard asset? Yes; "Hard Money".

In between Grandma and the large nationwide companies are the smaller companies, and individual investors operating out of their LLCs, IRAs, 401Ks, and personal bank accounts. Different goals, different overhead, different risk tolerance, different terms, and different rates. Found online, in local meetups, seminars, and by word of mouth. Unique as whatever their imagination can come up with, and whatever you can negotiate...unified only by their loans being collateralized by a hard asset; "Hard Money".

But wait, where does the Private Lender come in? Back to Grandma we go. Can a stranger call up Grandma for a loan? Can a real estate investor from across the country reach out to your Grandma, send her their scope of work, receive back a quote and terms, and have six figures wired to the closing? Probably not (unless it's your sister or brother, and they're the other investor in the family), because Grandma is your private Grandma. Grandma doesn't know about real estate, or LTVs, or skin in the game...Grandma knows you from the day you were born. Grandma is a Hard Money lender, who is a Private Lender for you.