Private lending is an alternative to traditional funding for real estate purchases. An individual, a group of individuals, or a company lend money based upon the attributes of the real estate opportunity under consideration. Many of the rules, regulation, and traditions are not applicable in private lending situations. These loans are sometimes called “hard money loans.”
Private money funding is more expensive than traditional lending due to higher risk that exists because of non-standard loan requirement criteria. The loan criteria are based on the liklihood of success for the particular project, rather than the financial profile of the borrower. This type of financing provides a source of capital to real estate entrepreneurs, while at the same time providing an attractive rate of return for the lender.