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Using Hard Money

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Rich Darragh

Real Estate Investor from Fort Worth, Texas

Feb 06 '13, 07:36 AM


What is everyone's opinion on using hard money to invest in real estate?

I know you are risking a lot less money (and in turn you have more cash to do more deals simultaneously) and it drastically raises your ROI, but I just wanted to ge the BP world's opinion on it.



Ann Bellamy Verified

Real Estate Lender from Tyngsboro, Massachusetts

Feb 06 '13, 07:47 AM
2 votes


If you can get a better rate elsewhere, do so.

If you can't get a better deal elsewhere, or the timeframe doesn't allow for cheaper financing, then make sure the deal supports it before you commit.

And you're not really risking less money. You always sign a personal guarantee on a hard money loan, so if you default, and the foreclosure doesn't make the lender whole, they will go for a deficiency judgement.

You use the tool appropriate for the job at hand.



Medium_small_logoAnn Bellamy, Buy Now, LLC
Telephone: 800-418-0081
Website: http://www.buynowhardmoney.com
Hard money lending in NH and MA, and for free networking in MA, http://www.BlackDiamondREI.com


Bill Worsley

Hard Money Lender from Davidson, North Carolina

Feb 06 '13, 08:04 AM
1 vote


As always @annbellamy hits nail on head...

If a hard money allows you to move forward on a profitable investment after paying the lender, you should strongly consider it, understanding there is risk in the event of nonperformance. If you can keep 60 to 70% of the profit in the deal, vs. 100% of $0 profit because you were not able to do the deal, then hard money makes sense.

Look at hard money as the middle ground between bank financing and equity. Equity wants 50% when all is said and done (and will also share in the downside if that occurs). The bank will be cheaper, but much harder to get. So see hard money as a tool that allows you to leverage your limited capital and increase your ROI significantly.

And by all means, develop your own sources of private money over time.



Aaron Norris

Rehabber from Riverside, California

Feb 06 '13, 08:51 AM


As a hard money lender, we always tell people to max out conventional financing first. After that, we often less expensive, and less hassle, than having an equity partner. Instead of worrying about raising money, you focus on deals.



Medium_tng_webAaron Norris, The Norris Group Hard Money
E-Mail: [email protected]
Telephone: 951-780-5856
Website: http://www.thenorrisgroup.com
The Norris Group l www.TheNorrisGroup.com


J Scott Moderator Donor

Real Estate Investor from Ellicott City, Maryland

Feb 06 '13, 08:54 AM
1 vote


Completely agree with Ann (and Bill)...

If you have other -- less expensive -- options, use those first. If you don't have other options, and you're confident that you can still earn a profit despite the HML fees/costs, then there's absolutely nothing wrong with HML.

A lot of successful investors got their start using hard money, and I know some very successful investors who are STILL using hard money today (though at rates a bit better than typical hard money), because it supports their business and growth model and is their best financing option given their particular situation.

Personally, if I were to go through all my cash and private money, I'd happily use hard money if I could still make money a deal. And I wouldn't be surprised if I do at some point in the future.



Medium_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


Corey Dutton

Real Estate Lender from Salt Lake City, Utah

Feb 06 '13, 08:55 AM


I know a retired r.e. investor who has done over 400 flips in his career in Southern CA. He said he was doing 4 homes at a time and couldn't have done it without using hard money. He never used one bank loan because he had a need for speed. He's now retired and a millionaire. He says, "your most expensive money is your own money, your second most expensive money is your partner's or family member's money..." Notice he doesn't say hard money is your most expensive money?



JD Castillo

Foreclosure Specialist from Fort Worth, Texas

Feb 06 '13, 11:45 AM


if you are going to buy fix and rent the house and it isn't in condition to qualify for conventional financing, the best way to buy is using a hard money loan that converts to a conventional loan once the rehab is done. not all hard money loans do that so shop around. i know sherman bridge does in the Texas market.

however if you are flipping a property i feel it's best to max out the ARV as high as you can get approved for when deciding to buy, hence increasing your potential profit spread. always make sure you have all your ducks in a row and all of your contractors set and ready to go the day of closing. the sold comps in your area should have low days on market. time is money...especially when using hard money! if you make sure all of that is done...hard money is a great way to leverage your available cash.



Glenn Espinosa

Rehabber from

Feb 06 '13, 12:39 PM


Everybody above me is correct.

In my case I'm using hard money as my bridge to greener pastures (better financing). Without HML's I wouldn't have been able to build my track record as fast as I would have wanted to. Because of the track record my hardmoney deals provided me Im starting to attract private money. It's all a process.

Will I use HML when my private money dries up? - everytime!

Will I have to be extra careful about my numbers to make sure I come out green on the other side? - not anymore than I do with my other deals.

Will I always be on the search for cheaper money? - yup!

In the end use it, its a tool and HMLs wouldn't be in business if your competitors didn't maximize their use.



Aaron Norris

Rehabber from Riverside, California

Feb 06 '13, 12:43 PM


Nice website @Glenn Espinosa



Medium_tng_webAaron Norris, The Norris Group Hard Money
E-Mail: [email protected]
Telephone: 951-780-5856
Website: http://www.thenorrisgroup.com
The Norris Group l www.TheNorrisGroup.com


Glenn Espinosa

Rehabber from

Feb 06 '13, 12:52 PM
1 vote


Thanks @Aaron Norris! We're trying hard to build a strong brand over here in my neck of the woods. Respectable Hard money lenders like yourself (and others who posted in this thread) are helping us do that so its a win-win for everyone involved.



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