Boston Real Estate Investors Association

Hard Money vs Private Money

Hard Money vs Private Money

Hard Money Vs Private Money
by Tony Youngs

I began my real estate career back in 1986 after I attended a seminar and purchased a home study system and then began to implement it. The course taught me how to find foreclosure properties in my county and then I would go out and look at the ones in my area. One time, I came upon a property that I thought was vacant, as it was in pretty bad shape.  While walking around the property, to my surprise, it turned out that it was not vacant and there was a lady in the window looking out at me. I knocked on the door to explain that I saw the property was going up for auction and that thought it was vacant.  After I apologized for not knowing the facts, she was very nice and asked if I would like to see the inside. Her husband was home, too and they explained how he lost his job and that’s how they ended up in foreclosure.

She walked me through the home and asked me how much I would offer for the house. I asked her how much she wanted and she quickly said $ 85,000. The house needed a lot of work but after repairs it would be worth around $ 125,000.  My problem was that I did not have the money. Just to get out of the situation, I offered less hoping she would turn me down so I could leave. Before I could get to my car, she called out and said her husband wanted to accept my offer. Uh Oh, I thought. Now what.  Where am I going to get the money?

I went to my father and told him about the situation and then took him to see the property. I asked him if he would be willing to fund the deal and we would share the profits. At first, he was reluctant as it looked pretty bad but I could see that some paint carpet and elbow grease would do wonders!  Finally, after some further discussion, I convinced him and he funded the deal.  That was the beginning of a lifelong career that has changed the lives of our entire family. It has been a great life for all of us. I often sit back and think of where we would be if he had not funded that deal.

Now, what if you don’t have a father that I willing or able to lend you money.  Today, investors have access to Hard Money or Private Money lenders. You can usually find a hard money lender by attending a meeting at your local real estate investors association – which is a good group to belong to. While there, ask the leader for some contacts and recommendations. The way Hard Money works, is that you must find a deal worth buying, the hard money lender will analyze the deal to see if it’s feasible, and then offer to fund 70 to 80% of the after repair value. They normally charge an upfront fee to loan you the money and some might ask for monthly interest-only payments during the renovation, and then ask for 10 to 15% at the end. I have never used or needed hard money but I did recently call one to see what it would take.  They will also want to see a substantial amount of money in your bank account to make sure will get paid back if the deal goes south.

On the other hand, there is Private Money.  This can be form your neighbor, friend, fellow investor, doctor, real estate agent, golf buddy, or anyone who has money in the bank. They, like my father, will usually fund the deal and share the profits in the end. There are no upfront fees. Where do you find these “hero’s?”

The first thing you need to do is get good at finding the deals. Once you do that, private money lenders will come out of the woodwork and plead with you to cut them in. I myself have gotten really good at finding deals and often have to choose who I will cut in and who I cannot.  Today there are many people wanting to fund my deals, simply because I am constantly talking with property owners and solving their problems.

As I look back to the very first real estate seminar I ever attended, the presenter said, don’t worry about the money, “if you find a deal, the money will come” Oh how true that has turned out to be.


Tony Youngs is a national speaker, trainer, and active real estate investor who takes you by the hand in your own back yard to teach you how to be good at finding good deals. He can be reached through his website at



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