Use my own money or use a hard money lender?

5 Replies

Wondering whether I should use money from an inheritance I'm getting to do a fix and flip, or find a hard money lender instead.

This will be my first deal on my own, as the last one I did was a partnership with my dad where he supplied all the money needed.

My thinking for using a hard money lender is that I could utilize other people's money and keep the majority of my inheritance on hand as a reserve. I'm planning to start out with entry level fix and flips, 2bd/1ba-3bd/2ba in established neighborhoods.

Any input is appreciated as I have never gone the hard money route before, but it seems like it might be a good idea, especially if I were able to do the deal and keep the inheritance as a kind of safety net.


I prefer to use hard money because it allows you to have cash on hand if you run into a great deal or run into issues. It also provides a second set of eyes to confirm its actually a deal and the draw schedule helps keep your GC on track.

Thanks Joe B. for the input. My reasoning for using hard money is the same as you stated, mainly the having cash on hand in case I were to run into any issues. I hadn't thought about having more eyes on the deal aspect though, so I'm glad you mentioned that. Always good to have more experienced people than yourself looking at probable deals.

Joe makes good points. I'll play devil's advocate for you. Hard Money is going to cost you a portion of your profit that you could otherwise keep for yourself by using your own money. If you can use your own money AND have some cash reserves as a back-up, it's a win/win for you. Run your numbers, check them twice, and kick in an extra 10-15% of your estimated rehab cost for "fudge factor". Save your profits instead of paying a portion of them as interest and points to the hard money lender. 

Hi @Walter Key thank you for the response. I have thought about what you said, and I probably should have added this to my original post, but left it out. I am not sure on the exact amount I will be getting as inheritance, and have a feeling that it may not be quite enough to completely self fund the project start to finish. Even if it was, I would feel a bit uneasy putting every penny of it into the project and not having some kind of reserve/emergency fund should I need it.

I suppose another option would be to use a portion of my own money, that way I would be able to borrow less from the lender, ultimately putting more money into my pocket instead of theirs.

I'm glad BP exists, as so far it has been a great source of knowledge for me. It's given me some ways to think about investing that I previously hadn't been able to wrap my head around.

@Evan Bell In that case, I would recommend a HML. Establish the relationship early and make sure you know the terms (points, interest, what LTV they lend to, early repayment penalties, etc). My previous post stills stands, run your numbers, check them twice, include a fudge factor.

There are some HML out there that will lend 90% LTV on the ARV and 100% of the rehab cost. This should leave you with some reserve cushion after getting the deal funded.

Best of luck to you!