A new land investor asked me, "Are you hard money or private money?" Fair question. People use the two terms like they mean the same thing, and sometimes they do. But when you are shopping for a loan on raw land, the difference can cost you real money.
What is the difference between hard money and private money?
Hard money usually means a lending company. Private money usually means an individual.
A hard money lender is a business that makes short term loans secured by real estate, with set terms and a set process. Private money usually means one person lending their own cash, like a friend, a relative, or a local investor. Both move faster than a bank. The terms, the paperwork, and how reliable the funding is can be very different.
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$30K to $1M, 20% down, no appraisal, no points, close in about 7 days. Written quote in 24 hours.
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Hard money has published terms. Private money terms are whatever you negotiate.
| Hard money | Private money | |
|---|---|---|
| Who lends | A lending company | An individual |
| Terms | Set and written | Negotiated each deal |
| Rate | Usually 12% to 18% on land | Anything, sometimes lower |
| Speed | Days | Days, if the cash is ready |
| Documents | Full loan package, title, lender policy | Varies, sometimes a handshake |
| Can it fund the next deal? | Yes, it is their business | Maybe, if they still have cash |
Our hard money land loans are 14% on loans of $100K and up and 16% under $100K, interest only, with a $600 closing fee, a 2% exit fee at payoff, and no points. See all of it on hard money land loans.
Is private money cheaper than hard money?
Sometimes on rate, not always on total cost.
A friend might lend at 10%. But ask what else comes with it: a profit split, a personal guarantee to someone you see at Thanksgiving, or a lender who backs out when their own plans change. In my experience, the cheapest money is the money that shows up on closing day. Compare the total dollars on our land loan calculator.
When should I use private money for land?
For small deals with someone you trust, with real documents.
Private money works well when the deal is small, the lender knows land, and you close through a title company with a recorded note and mortgage or deed of trust. I would avoid handshake deals. If the lender dies or you disagree, a loan with no documents is a lawsuit waiting to happen.
- Close through a title company
- Sign a promissory note and a recorded mortgage or deed of trust
- Get a lender's title policy for the private lender
- Put the payoff terms in writing
When should I use a hard money lender for land?
When you need a sure close, bigger dollars, or a lender for your next deal too.
A hard money lender that specializes in land can close in days, lend up to $1M, and fund your next flip without a new pitch. Most hard money lenders fund houses and pass on raw land, so ask up front. We lend on land only. Rule of thumb: private money for the one off, hard money for the business.
Can I use both on one land deal?
Yes. A private partner can put up the down payment while a hard money lender funds the rest.
This is a common setup. Your partner brings the 20% down as equity, and we fund the loan. You bring the deal and do the work. More on this on creative deal structures. If you own other land, cross collateral can replace the down payment altogether.
Frequently Asked Questions
What is the difference between hard money and private money?
Hard money usually means a lending company with set terms. Private money usually means an individual lending their own cash on negotiated terms.
Is hard money more expensive than private money?
Often on rate, but not always on total cost. Private money can come with profit splits or funding that falls through.
What does a hard money land loan cost?
Damen Capital charges 14% interest only on loans of $100K and up, 16% under $100K, a $600 closing fee, a 2% exit fee at payoff, and no points.
Can I use private money and hard money on the same land deal?
Yes. A private partner can put up the down payment as equity while a hard money lender funds the loan.