Both hard money and private money are typically asset based loans, backed more by the strength of a real estate purchase than the financial credentials of the borrower. Both are from non-traditional lending sources. (Neither are banks or national lenders.)
So how are they different?
Hard money lenders, despite their non-traditional status, are still organized money lenders and are usually in some way licensed to loan money.
Private lenders are just what their name suggests - private. They could be a friend, family member, business associate, or maybe just a professional referral. In any case, their role as a provider of funding is strictly as you agree upon with them.
Hard money lenders typically have lending criteria. Their loans have defined durations, interest rates, and upfront points, all of which are known prior to a loan ever being issued. In fact, these criteria are often used to differentiate and select hard money lenders, when investors are shopping for available options.
Private money is much more flexible on all of the points mentioned above. Most have no preset criteria, and the loan terms you work out with them are almost always a function of how well you negotiate them for a particular loan.
Limits on lending, interest rates, and loan duration are all, as they say, "open for discussion," so a simple commitment to an agreement suitable to all parties will often get the job done.
Private money is more flexible--and usually cheaper!
An important thing to mention is that private money is characteristically cheaper than hard money. This is not always the case, but it is a common trend nonetheless.
Why? Most hard money lenders get their funds (at least in part) from private sources, so they must mark up their interest rates and fees to make a profit. When you work directly with private sources of capital, you effectively cut out the "middle man" and can be in line for better terms.
Hard money is usually easier to find.
The obvious caveat to private money is that lenders are not usually out there advertising that they have money to lend. Hard money lenders will often do just that because they are specifically in the lending business. It just makes sense for them to promote what they do.
Because of this, hard money is usually easier to find and requires fewer business/negotiation skills to secure a loan.
But if you are willing to make the effort, private money...
- is out there
- is very comparable to hard money, and
- is therefore an excellent way to fund real estate deals
(1942)
. In the book he breaks down all of societies preconceived notions on things such as video games. Some say kids today spend too much time playing video games and not enough time playing ball outside. That very notion Mr. Johnson broke down into a graphical presentation explaining the thought processes someone goes through to reach various levels of a video game like 
. He flowcharted the steps of how a business will implement a new product from conception to final market plan. Then he placed a flowchart of just how the video gamer will go from the first level of the game to achieving the highest level. And these gamers will do it without reading a book about the game. No cheats if you will. It was an amazing eye-opener to say the least. So what has this to do with social networking your business? Technology, mobility, integration all play crucial roles in your ability to stay in touch with your base and your prospective investors. Kids are spending way too many hours on video games sounds logical - but is it. Mailing a post card to reach property owners may sound good and solid. But for the most part today it just isn't going to reach the highest number or people.
, 
, Digg, 
and others. These aren't fads - these are tools for reaching your customers and peers. It is as crucial to you as your contact management software. Make your resolution that this year will be the year you Tweet or MySpace. 
