Hard money and private money are short-term loans used mostly by investors who need to move quickly, buy a property that a bank will not finance, or fund repairs. They are based mainly on the value of the property and your plan, not just your income and credit. They also cost more than a traditional mortgage, so the deal has to leave room for the cost.

Hard money versus private money

• Hard money: usually from a company that lends to investors, with set terms, fees and a fast closing
• Private money: usually from an individual, such as a friend, a family member or a private investor, with terms you negotiate

What these loans usually look like

• Short terms, often from several months to a couple of years
• Higher interest rates and upfront fees, called points, than a conventional loan
• Interest-only payments with the balance due at the end
• A loan amount based on the purchase price and sometimes the after-repair value
• Repair funds that are released in stages, in some cases

Terms vary widely, so compare more than one option and read the fees closely. Do not rely on a quoted rate until you see the full cost in writing.

Plan your exit before you borrow

Short-term money needs a clear exit: you sell the property, refinance into a longer loan, or pay it off another way. Ask what happens if the project runs late. Extension fees, penalties and default terms can turn a thin profit into a loss.

Protect yourself

• Run the deal with all financing costs included
• Keep a reserve for delays and surprises
• Have an attorney review private loan documents
• If you borrow from private investors, talk to an attorney about securities and lending rules

How we help

We run the numbers with you and tell you when a deal cannot support the cost of the money. Talk to Nil about approved lenders. We work with investors across Atlanta, Brookhaven, Decatur, Duluth, Ellenwood, Griffin, Hampton, Lawrenceville, Lilburn, Locust Grove, McDonough, Norcross, Snellville, Stockbridge, Stone Mountain and Tucker.

Related: flip buyers and wholesalers.

Nil Patel is a licensed Georgia real estate salesperson with Keller Williams Realty Atlanta Partners. This page is general information, not legal, tax or financial advice, and nothing here is a commitment to lend. Talk to a lender and a real estate attorney about your own situation. Investing involves risk, and past results do not guarantee future results. If Nil, a team member or an affiliate wants to buy a property directly, that buyer will say so in writing before you sign.