Private vs. Hard money – What is the difference?

hard money lending massachusettsPrivate lending and Hard money lending, they are very different.


By definition hard money is, a specific type of asset-based loan financing through which a borrower received funds secured by real property (real estate).  Hard money loans are typically issues by private investors or companies.  A simpler version is, short term money to be used as cash to finance real estate deals.


Private money in contrast by definition is, a non-institutional (non-bank) individual that loans money, for the purpose of funding a real estate transaction.  Private money lenders were generally considered more relationship-based than hard money lenders, but us very nice and relationship focused people here at Summit Capital beg to differ!  We want to be your Massachusetts private money lender.


The big difference is private money tends to be from people like uncle Joe, or neighbor Susan, where hard money comes from companies like Summit Capital.  The big downfall that we have found with private money investors is that they are not always around when you need them, and neither is their money.  It tends to dry up after one or two deals, or is pulled away from you without notice to fund a vacation, addition, or college education.  Believe us, we have borrowed a ton of private money and even though it was slightly cheaper, it was NEVER worth the headache.


Good and repeatable Hard Money lenders like Summit Capital are a constant, reliable business partner here to help you grow your real estate investing businesses.  Borrowers that try to finance their deals with their own cash / HELOC, etc, often run into issues of liquidity, not having enough cash to finish projects, cover cost overages or emergencies that come up.  That is why we have always used other people’s money on our investments and kept our cash or at least a good amount of it ready for the unforeseen issues that pop up.


Another positive for using Summit Capital is that we are much cheaper than bringing on a business partner and giving them 50% of the profits.  We are locally here in the Massachusetts market servicing all over the state with a focus on Boston and points south.  South Shore and South coast investors can rely on Summit Capital to fund their real estate deals with fast and attentive service and very competitive rates and terms.


Typical Terms for our borrowers are in the 12-13% interest range, and the 2-3 point range depending on the quality of the deal and the experience of the borrower, and can close that deal within 1-3 weeks!  We believe in the business and our borrowers so much that the two principals heavily invest their own cash into the deals.  Summit’s money is a combination of that owner invested cash, and also private and institutional investor money.


Our typical terms are 3-6 months, but can and will extend to 12+ months as needed.  Another great benefit of not being a bank is that we tend to lend to much higher LTV’s and up to higher percentages of the ARV, so when traditional banks say no, we say yes!


We are in first position meaning we hold the note, and in exchange provide the borrower mortgage / loan so they can borrow our funds.


We wanted to provide some basics as to what Hard / Private Money is and how you can use it to assist in your real estate investing goals.  Summit Capital Management takes pride in being a locally based, family owned, hard money lender in Massachusetts. We serve all of Massachusetts with a focus on Boston, the South Shore and South Coast Markets. Contact us on your next deal!