Is hard money the answer?

13 Replies

Hey everyone,

I have found a deal, I have the money for the down payment plus a bit extra, and I have stellar credit. That being said I cannot get a loan through a bank or mortgage lender due to being self-employed and having a bad year last year. My friends and family have no interest in pursuing real estate or anything real estate related. So my question to you all is is pursuing hard-money my best bet? Thank you for the feedback.

@John Robb

If the numbers work then yes use hard money. If it’s a good deal and cheaper sources of money are not available to you then that’s the next logical step.

But you didn't mention what the deal is. Is this a flip where you can reasonably expect to have the cash to pay off the hard money lender? A BRRRR?

@John Robb

I would reach out to multiple lenders to make sure you’re able to refinance out of the property to play it safe. If you’re able to find a couple lenders who will refi for you, and you see it as a good deal I would move forward. Wish you the best!

If you can't get a loan to buy it, how will you finance it after the HML ends? HML is risky for buy and hold unless you know you have a bank lined up for the re fi.

HML for flips is great.

 I know my opinion is not in line with a lot of investors. However I have been doing this for almost 30 years and have never used Hardmoney. I think that most deals that people get into with Hardmoney become very risky especially if the market turns. I would use hard money on the deal that’s the one in 1000 where the money is just so profitable that it makes sense but it would have to be a huge profit to be worth the gamble.  With Hardmoney you are depending on the property being liquid and that is not the case in many situations. Therefore as you hold it longer you lose a lot of money and even risk losing the property altogether.  So my two cents worth is to do everything possible to use some sort of private money for other sources. Unless of course there’s just such a huge profit that it’s worth it. 

@John Robb

Okay so the main issue is that you have to be sure you have a way out of the hard money since you’re not going to sell.

If you can’t get a loan on it now, what is changing in the next few months that would allow you to refinance into a traditional mortgage?


There are a few lenders that offer products for buy and hold. Lending one and Lima one for example. If you can cash flow with them, are comfortable with the rates, and have the potential to refinance out in a few years then it could be a win win. 

@Tyler W. @Allan Smith @Daniel Haberkost

Thank you all for the insight. I had originally thought of doing like Tyler said and using a Lender that offered year+ terms. My thinking being this year is almost over and and so I would only need the hard money for a year at which point my returns would allow me to get refinancing. That being said it would be far better if I had a deal with a local bank to guarantee a refinance at the end. The deal cash flows so well that even after pay the hard money cost it would still be profitable. That being said it from all your feedback it sounds like finding a partner with the financials would be safer better play. Thank you all for the awesome information.

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