Private Lenders and Hard Money Lenders

Hello to everyone today, I have a questions concerning the functions of a hard money lender and a private money lender.

What are the major differences between a hard money lender and a private lender?

Do hard money lenders as a rule generally specialize in transactions dealing with residential property and private lenders generally specialize in commercial real estate transactions?

I ask this question because I have heard that a private lender may be more willing to completely finance [points, down payment, and other fees] in a rehab real estate transaction as long they retain a 2nd lien position in the case of default of loan repayment?

If any lenders, hard money or private will like to discuss in further detail their functions, please pm me in order not to break any forum rules. Thank you.

I think you meant first lien position. Since the private lender would be the primary lienholder they would be in first lien position.

Thanks for the correction Christopher W, I meant first lien position, do you have any further information about the differences in functions between the private and hard money lender?

As hard money is funded in most part by individual private investors, the differences are slight at best—in my work with both, I found the nuances to be:

  • The hard money lender acts pools the money from many PIs and puts on the street in a uniform format—PIs don’t necessarily have a uniform approach.
  • HMLs tend to be slightly more expensive then PIs (because they are making a margin on the PIs money while offering a ROI to the PI).


Scott Miller

Mr. Miller, Thank you for providing a brief analysis about the services and functions of the hard money lender and the private investor.