Mortgages & Creative Financing

Hard Money: What Is It and How Do Hard Money Loans Work?

Expertise: Real Estate Marketing, Personal Development, Real Estate News & Commentary, Mortgages & Creative Financing, Real Estate Investing Basics, Landlording & Rental Properties, Flipping Houses, Personal Finance, Business Management
301 Articles Written
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Most real estate investors hear terms that they don’t understand in the beginning. One of these terms, hard money, is little understood, and frequently asked about. Here is a great explanation of hard money. What Does Everyone Mean by Hard Money? What is Hard Money Hard money lenders (HMLs) are typically private individuals or small [...] View the full article: Hard Money: What Is It and How Do Hard Money Loans Work? on The BiggerPockets Blog. This content is Copyright © 2017 BiggerPockets, Inc. All Rights Reserved.

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Joshua Dorkin is a serial entrepreneur, investor, podcaster, publisher, educator, and co-author of How to Invest in Real Estate. He started BiggerPockets to help democratize the real estate investing landscape for himself and others, aiming to make it accessible for everyone, regardless of income or education. Today, BiggerPockets is the premier real estate investing website online with over one million members and reaching over 70 million people with the message of financial freedom through real estate investing. Joshua, along with his wife and three daughters, make their home in Denver, Colorado, and spend any time they can traveling, exploring, and adventuring. Read more about Joshua’s story in 5280 and Inc.com.

    Scott Poliseno
    Replied over 12 years ago
    Great Information! Keep blogging and I will keep reading. I am new the REI and appreciate the time it took to provide this information. Thanks! Scott Poliseno
    Kathi Dameron
    Replied over 12 years ago
    What is the best way to find Hard Money Lenders? I am planning to join a Real Estate Investing Club and also engage in plenty of Internet research, but are there some other good ways to find private investors?
    Kathi Dameron
    Replied over 12 years ago
    What is the best way to find Hard Money Lenders? I am planning to join a Real Estate Investing Club and also engage in plenty of Internet research, but are there some other good ways to find private investors?
    Zach @ Mid Mo Mortgage
    Replied over 9 years ago
    As far as I am aware, the Internet and networking with local lenders is the only way. I’ve never even heard of a “Hard Money” lender until last month, and I don’t know of a single one in my city. Reply Report comment
    Zach @ Mid Mo Mortgage
    Replied over 9 years ago
    As far as I am aware, the Internet and networking with local lenders is the only way. I’ve never even heard of a “Hard Money” lender until last month, and I don’t know of a single one in my city.
    Kathi Dameron
    Replied over 12 years ago
    What is the best way to find Hard Money Lenders? I am planning to join a Real Estate Investing Club and also engage in plenty of Internet research, but are there some other good ways to find private investors? Reply Report comment
    Ed Lathrop
    Replied about 12 years ago
    I really think the flipping days are over for now. In great market conditions aggressive strategies work fine but for now, I’m ready to cool it. It might be time to wait for bargains.
    Billy
    Replied almost 12 years ago
    Thanks for the detailed info on HMLs, yes they are a great way to get started in REI.
    Eric Corl
    Replied almost 12 years ago
    Great information – well written and concise. I’m looking forward to more posts like this.
    Chantal in Orlando
    Replied over 11 years ago
    I agree with Ed. The flipping days are long gone. If you speak to flippers in todays market the song they are singing is ‘Buy Low, sell even LOWER’. I don’t know about you, but flipping in this market doesn’t make a lot of sense. Now is the time to buy and hold. Reply Report comment
    Chantal in Orlando
    Replied over 11 years ago
    I agree with Ed. The flipping days are long gone. If you speak to flippers in todays market the song they are singing is ‘Buy Low, sell even LOWER’. I don’t know about you, but flipping in this market doesn’t make a lot of sense. Now is the time to buy and hold.
    Chantal in Orlando
    Replied over 11 years ago
    I agree with Ed. The flipping days are long gone. If you speak to flippers in todays market the song they are singing is ‘Buy Low, sell even LOWER’. I don’t know about you, but flipping in this market doesn’t make a lot of sense. Now is the time to buy and hold.
    yanni raz
    Replied about 11 years ago
    There are many types of hard money loans, if you’re not sure if hard money loans is the right way for you to go try to understand first what is hard money loans? You can go to my website of course any time to read more about had money lending. Most loans are done for investment properties non owner occupied. So if you’re looking for a commercial or residential hard money deal you have to know that the interest rates are higher than conventional lending and the points are like 5 at least for each loan you will apply for. Let me know if you need more help. Yanni Raz
    Michelle
    Replied over 3 years ago
    We’re waiting for estate probate account to release monies. We are living in a home that we will purchase. Owner has allowed us to rent until then. If anything is taken from account we will not have all the monies for purchase. If needed 40-60,000 HML how will that work? How much upfront monies needed and monthly payment. Total home is 95,000 and at time of monies released we will have 35000 cash . How can u help. Would this be a good idea?
    Anonymous
    Replied almost 9 years ago
    Don’t be confused, though, hard money loans are not a simple alternative for those with poor credit. Even private investors aren’t interested in a borrower with a history of bankruptcy or non payment. In addition, the closing costs on a hard money loan must be paid up front. These fees could be a couple hundred dollars or a couple thousand, making the hard money loan a non choice for most borrowers in distressed situations. If you fit into one of the unique scenarios that would benefit from a hard loan, do your research before signing any papers. Get recommendations on the private lender when you can. With no bank regulations on private lending the only one who can separate a legitimate lender from a loan shark is you.
    Anonymous
    Replied almost 8 years ago
    Great Article on Hard Money Loans!!
    Anonymous
    Replied almost 8 years ago
    Great Article on Hard Money Loans!!
    Gerard
    Replied almost 5 years ago
    Thanks for the article, was very informative. One of the strategies you mention included making a loan to get in the door. Then refinancing to get out of it. In this scenario, is the first payment on the HML due in 30 days or is there time given to make rehab changes rent or re-finance?
    Gary
    Replied about 4 years ago
    Im new to REI. what is an origination fee and do I need any money up front to get a loan for a rehab?
    Ryan
    Replied about 4 years ago
    I live in Studio City, CA and have just pre-qualified for a $260 loan with $70k down on a condo. Two questions: 1). I would MUCH rather work with a hard money lender but don’t know any in Studio City. Do they advertise locally? or would HML’s in other cities or states lend money? 2.) Do they loan money for condo rehabs? Wonderful article! Thank you for taking the time to write it.
    Ryan
    Replied about 4 years ago
    I live in Studio City, CA and have just pre-qualified for a $260 loan with $70k down on a condo. Two questions: 1). I would MUCH rather work with a hard money lender but don’t know any in Studio City. Do they advertise locally? or would HML’s in other cities or states lend money? 2.) Do they loan money for condo rehabs? Wonderful article! Thank you for taking the time to write it.
    Michael Guerrin from San Antonio, Texas
    Replied almost 4 years ago
    Can I use HMLs for buy/sell type deals? No rehab. The reason I ask is because I spoke with one HML today who turned me down because I told him I would be selling the property to another investor once I bought the property.
    Michael Guerrin from San Antonio, Texas
    Replied almost 4 years ago
    Can I use HMLs for buy/sell type deals? No rehab. The reason I ask is because I spoke with one HML today who turned me down because I told him I would be selling the property to another investor once I bought the property.
    Benjamin Cowles from Cape Coral, FL
    Replied about 3 years ago
    Good question
    john doe
    Replied over 3 years ago
    i was told you can only get a hardmoney loan 3 times then you cant get them anymore is that true? and what are the points for or mean?
    Andrea Heintzelman Lender from Alexandria, Virginia
    Replied about 3 years ago
    This article on “who is a hard money lender” was excellent and as you stated, a subject that has been little understood or written about. As I would like to become a “hard money or private money lender”, I still have questions not answered in your article. Some of these questions are: (1) as a lender, do I need to have a Trust Deed written by a real estate lawyer in the State where the borrower’s property is located or can I have it done in my home State; (2) is the borrower responsible for paying for the Trust Deed we both sign; (3) what information do I need to know about the borrower; and (4) what criteria must be part of the Trust Deed to protect my interests?
    TonyG
    Replied almost 3 years ago
    I’m looking into becoming a HML. Can anyone provide me some tips where/how to start this new venture? Reply Report comment
    TonyG
    Replied almost 3 years ago
    I’m looking into becoming a HML. Can anyone provide me some tips where/how to start this new venture? Reply Report comment
    TonyG
    Replied almost 3 years ago
    I’m looking into becoming a HML. Can anyone provide me some tips where/how to start this new venture?
    TonyG
    Replied almost 3 years ago
    I’m looking into becoming a HML. Can anyone provide me some tips where/how to start this new venture?
    James Bergman
    Replied almost 3 years ago
    Just to make sure I am understanding correctly. Hard money loans are just loans taken from private individuals or institutions. They are also collateral loans that ensure the lender will not lose anything on his investment, correct?
    Mastewal Gezahegn from San Jose, California
    Replied over 2 years ago
    I believe so. Don’t forgot the much higher interest rates and that many lenders have 6 to 12-month limit.
    Hoshi Hutabarat Investor from Cleverdale, New York
    Replied over 2 years ago
    is there any hard money lender that provide loan for overseas
    Christi Hawkins from Columbus, Ohio
    Replied almost 2 years ago
    Great information!!!
    Scott Michael Flipper/Rehabber from Portland, OR
    Replied over 1 year ago
    I would like to purchase a rental property from a wholesaler using hard money, then after the seasoning period put it on an FHA loan at 3.5% down. Can I do this?
    Scott Michael Flipper/Rehabber from Portland, OR
    Replied over 1 year ago
    I would like to purchase a rental property from a wholesaler using hard money, then after the seasoning period put it on an FHA loan at 3.5% down. Can I do this?
    Elena Michelson
    Replied about 1 year ago
    Hard money loans are great for fix and flippers as they help with both financing and rennovating the property. Anyone that is looking to get into this market should consider this loan and learn more about how they can take advantage of this oppotunity presented to them.
    Shane Adsir
    Replied 12 months ago
    Question: what do you mean “as a start” can you refinance this right after you get it to get rid of the insane interest rate? My problem right now is I found an insane life changing deal but cannot finance it myself.