BiggerPockets

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.

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.

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.

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.

Nice website @Glenn Espinosa