Private money loans (also called hard money) provide investors with cash to purchase real estate properties in exchange for a specific interest rate. The terms are generally established up front with a specified payback period – anywhere from six months to a year.
These loans are most common when investors believe they can raise the value of the property over a short period of time, typically through renovations.
Private money financing is generally determined by the value of the investment property itself, with lenders analyzing the “After Repair Value” (ARV) to determine the size of the loan.
Private money should only be used when there is a clearly defined exit strategy.