Hard Money Lending versus Real Estate Crowdfunding

Funding real estate projects is becoming easier and more diversified. The power of the internet has given rise to real estate crowdfunding and hard money lending. Both forms of funding have their own merits, making each suitable for borrowers based on their financial needs.

last updated Sunday, July 13, 2025
#crowdfunding hard money lending #real estate crowdfunding

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by John Burson

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Funding real estate projects is becoming more accessible and more diversified. The power of the Internet has given rise to real estate crowdfunding and hard money lending. Both forms of funding have their own merits, making each suitable for borrowers based on their financial needs.

Hard Money Lending

Hard money lending entails a company providing hard money loans for real estate using the borrower’s real estate as collateral. Obtaining a hard money loan for real estate is naturally a speedy process because it doesn’t come with the conditions that are common with traditional bank loans. Instead, hard money lenders emphasize the value of the collateral, the interest rate, and the advance rate of the hard money loans for real estate. The rate that is based on the collateral value is referred to as the advance rate. The interest rate of commercial hard money loans for real estate begins at 10% and rises to the mid-teens. The maximum hard money loan for real estate development or purchase that commercial hard money lenders can offer you is 70% of your home’s value. One of the advantages of hard money lending is that hard money loans for real estate development are not affected by a bad credit history that you may have. This means that anyone who needs hard money loans for real estate, regardless of their poor credit history, can secure these loans and protect their businesses from falling during tough times. To complete the borrowing process, you must provide information on the collateral, such as the property's address, renovation budget, and purchase price, along with other relevant details. Commercial hard money lenders vary from one another. It is, therefore, vital that you choose the one that operates in your locality because many of them are licensed to work in specific regions.

Real Estate Crowdfunding

This involves soliciting funds from qualified stockholders via the Internet for various projects, including the rehabilitation and construction of real estate. Accredited investors are well-connected and have a keen understanding of the real value of residential and commercial properties. Although the strategy for a single crowdfunding campaign may differ, the overall concept remains the same. Once the fund is raised, borrowers can use the capital to complete their rehabilitation process or invest it in real estate. The money that the borrower takes can be secured or unsecured. The borrower’s property can be used as collateral for the loan. Raising funds through crowdfunding is a common and effective way to alleviate financial problems. However, there is an inherent risk for the moneylenders if the borrower fails to follow through with their project plans. Crowdfunding and its various applications evolve in tandem with the Internet. Crowdfunding can help inventors raise money quickly and successfully because they have extensive research. On the other hand, hard money loans for real estate boost a borrower’s cash flow fast by using the real estate as the collateral for hard money loans for real estate. Both real estate crowdfunding and hard money lending can be utilized to achieve financial goals and generate income.

 
 
 

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