Private Money vs Hard Money When Buying Houses

Oahu Home Buyers yard sign - Makakoa Loop Waipahu

You’ll often see real estate investors marketing under the slogan ‘WE BUY HOUSES CASH‘. While we all know that at the end of the day all transactions in Hawaii or elsewhere record in cash — no one is using poker chips or clamshells, after all — there is a big difference between buying a house with cash and attempting to buy it with a traditional conventional mortgage.

Buying a house with cash means avoiding the potential pitfalls that come with a buyer using a conventional loan, such as:

  • Appraisals not coming in high enough
  • Loans not getting approved because of the condition of the property
  • Waiting 45-60 days for the buyer’s bank loan to fund escrow when you really need to sell your house quickly

The advantages of buying a house with cash are clear. However, not all cash purchases are the same. There are generally three types of cash purchases: liquid cash, private money and hard money

Liquid Cash – just like it sounds, this is when a buyer uses their own liquid cash sitting in their bank account. It’s relatively straightforward — fund escrow, record the sale and that’s it.

Private Money – This is where a real estate investor like us uses the liquidity of others. This is also called private mortgage lending, and it’s a great way for investors like us to leverage the existing capital of someone else. For example, someone may have money sitting in a bank account not earning any interest or they may feel at risk investing in the stock market. By investing in one of our projects instead, they reap the benefits of a high, fixed interest rate along with the security of a mortgage against the very property we purchased.

We often use private mortgage lenders to purchase our properties. (if you’re interested in learning more about our private lending program, ask us here)

Hard Money – Buying a house with hard money is similar to using private mortgage money except that the hard money lender places their clients’ funds instead of their own. While the cost of hard money to an investor can be higher than private money where you’re negotiating one-on-one, it can also be readily available within days.

We often using private money or a mix of hard money and private money to buy our houses in Hawaii. For example:

  • Makakoa Loop in Waipahu was bought using a mix of hard money and private lender funds
  • Our current two-house CPR project in Waianae was also bought using hard money and private lender funds
  • Our Kalele Kai townhouse renovation project in Hawaii Kai was funded by two private money lenders
  • And so forth….

If you’re selling your house, then just know that we often use either hard money and/or private money to buy our houses. It’s what lets us buy three, four, five, maybe even six houses at once, all closing quickly without any of the hassles that you often face if selling to retail buyers.

It’s our job to make it easy for you to sell your house for cash.

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