Hard money and private money are both types of alternative financing used in real estate investing. Hard money is a loan that is secured by real property and is typically provided by private individuals or companies who specialize in this type of lending. Hard money loans are typically short-term loans, with terms ranging from six months to three years, and are used for fix-and-flip properties, bridge loans, and other types of real estate investments. Interest rates and fees for hard money loans are generally higher than traditional bank loans.

Private money, on the other hand, is funding provided by private individuals, often referred to as "private lenders" or "private investors." These individuals may be friends, family members, or other accredited investors who are willing to lend money to a real estate investor. Private money loans can also be used for a variety of real estate investment strategies and are often used to finance fix-and-flip properties, rental properties, and other types of real estate investments. Interest rates and fees for private money loans can vary depending on the lender and the terms of the loan.
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In summary, Hard money is a loan from a specialized lender with high interest rates and is short-term, while private money is funding from a private individual who may have lower interest rates and flexible terms.

How does a hard money loan work?

​​A hard money loan is a type of real estate loan that is secured by property. It is typically used as a short-term loan and is often used to purchase and renovate an investment property. The loan is called "hard money" because it is typically provided by private investors or companies, rather than traditional lenders such as banks. Hard money loans are typically more expensive than traditional loans, with higher interest rates and origination fees. The lender typically looks at the deal and not the borrower. Although the lender will look at a borrowers or guarantors credit score, the lender will look at the strength of the deal primary factor in lending. The loan is secured by the property and the lender will typically require a first lien on the property. Borrowers will typically use hard money loans for a short period of time until they can refinance to a more traditional loan. Typical uses are of hard money loans are for fix and flip properties and bridge loans that need a quick closing.

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​Real estate investors often prefer hard money loans because they offer several advantages over traditional loans:

1. Faster closing times: Hard money loans can be approved and funded much faster than traditional loans, which can take weeks or even months to close. This is particularly beneficial for real estate investors who need to close quickly on a property.
   
2. Less stringent qualifications: Hard money lenders often have less stringent qualifications than traditional lenders. They focus more on the value of the property being used as collateral rather than the creditworthiness of the borrower. This makes it easier for investors who may have lower credit scores to obtain financing.
   
3. Flexibility: Hard money loans can be used for a variety of purposes such as buying, rehabbing and flipping properties, refinancing, and bridge loans. This flexibility allows investors to use the funds for different investment opportunities and make better use of their capital.
   
4. Higher loan-to-value ratios: Hard money lenders often offer higher loan-to-value ratios than traditional lenders, meaning investors can borrow more money against the value of the property. This allows investors to leverage their capital and make bigger investments.
   
5. Short-term loans: Hard money loans are typically short-term loans with a maturity of one to three years, which is perfect for real estate investors who plan to hold the property for a short period of time.
   

It's important to note that hard money loans also tend to have higher interest rates and fees than traditional loans, and the loan terms are typically shorter. Therefore, it's crucial for real estate investors to have a solid exit strategy in place and be able to generate enough income from the property to pay off the hard money loan before the maturity date.