Hard Money Lending
New to Real Estate · OR · Member since 2025 · 67 posts · 24 votes
Hard Money Lending
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
5moHard money loan is from an investor that typically does not require any personal documentation or very little. You pay through the nose in interest rate and points. If you are a borrower with cash and good credit, you do not need a hard money loan, and you can get what is called a Residential Transition Loan, which is a twelve-month loan for a fix and flip project. That rates, depending on experience, can be anywhere between 9 and 11%. Typically, a hard money loan is 11 to 15%.
7e investments53 Reviews
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- Rental Property Investor · Cleveland, OH · Member since 2018 · 95 posts · 61 votes5moWe use hard money to buy properties we plan on fixing and refinancing.
Quote from @Samantha Chacon-Johnson:
Hello all,
I am wanting to learning more about hard money lending. What is hard money lending? How does it work? Instead of a bank/mortage loan, are you taking a loan from an individual with capital?
Has anyone go this route instead of traditional loans to purchase a property? What was the advantages? What were the disadvantages?
Samantha
Main Pro: Fast closings (sellers love them)
Main Con: Higher rates so short timeline (you need a plan to refinance or sell)
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes5mo
Hard money loan is from an investor that typically does not require any personal documentation or very little. You pay through the nose in interest rate and points. If you are a borrower with cash and good credit, you do not need a hard money loan, and you can get what is called a Residential Transition Loan, which is a twelve-month loan for a fix and flip project. That rates, depending on experience, can be anywhere between 9 and 11%. Typically, a hard money loan is 11 to 15%.
7e investments53 Reviews - 5moMatthew BernalBusiness MemberInvestor · Austin, TX · Member since 2021 · 497 posts · 126 votes
Hard money is asset-based lending the loan is secured by the property not your income or credit. Lenders focus on property value and exit strategy, not W-2s.
Advantages: fast approval, flexible, works on distressed properties banks won't touch.
Disadvantages: higher rates (10-12%) and short terms (6-18 months) — not for long term holds.
Most investors use hard money to buy and renovate, then refinance into a lower-rate DSCR loan once it's rented and stabilized. Two-step process.
I work with investors on both. Happy to answer any questions as you learn more.
What type of property are you thinking about?
- New to Real Estate · OR · Member since 2025 · 67 posts · 24 votes5mo
@Matthew Bernal wow that's great!m information.
There is a single family property near us that is under market value and the repairs needed are within mine and husbands skill set. We dont have the capital to purchase it with 20% down, but we can easily make the repairs. If I could get the mortage to be at $1800/month, I could rent it for $2000-$2500/month. So, I am interested in hard money lending.
- Specialist · NJ · Member since 2022 · 1k+ posts · 649 votes5mo
The term Hard Money essential means non conventional. Hard Money is what you use if you are borrowing in the short term. You are either buying a property in hopes of selling as is or you are buying a property that needs work and you are asking for rehab funds wrapped into your loan.
Think of hard money like a gun. Someone who is trained, and understands what the gun can and can not do and how it should be used, they can become a marksman. If you don't know/understand what you are holding you will kill yourself.
- 5moNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
most hard money lenders still want a down payment - typically 10%. and then as others mentioned you want to refinance out of the loan as quickly as possible, since you're just paying interest to service it. so you'd want to start the process on the loan you'd be refinancing into at the same time - you never want to take on a hard money loan without one or more clear exit options.
- 5moErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Quote from @Samantha Chacon-Johnson:
Hello all,
I am wanting to learning more about hard money lending. What is hard money lending? How does it work? Instead of a bank/mortage loan, are you taking a loan from an individual with capital?
Has anyone go this route instead of traditional loans to purchase a property? What was the advantages? What were the disadvantages?
Samantha
Hey Samantha,
Hard money loans are typically short term loans, 12-24 months, and are geared towards properties that need renovation or a quick closing.
The goal of this loan is to secure the property quickly and get out as fast as you can. You make monthly interest only payments on the principal balance and there is a balloon due at the end of the term of the loan. Rates are typically in the 10-13% range and there may be a prepayment penalty if the loan is paid off too early, typically before 3 months. Rehab may be financed and it is usually a hold back, where you request draws when you complete segments of the rehab.
Most lenders will require a minimum of 10% down + closing costs. Closing costs are typically on the high side, and can range from 4-7% of the principal loan amount. Some lenders may require to see 3-6 months of payment reserves and if the rehab is heavy, 25% of the rehab budget in liquid reserves. Some lenders may want to make sure you have a credit score of 650 or higher, however some may not really care about credit as much.
Lenders will qualify you based on your experience, deal profit, exit strategy, credit, and cash reserves. There is a lot of leniency in the Hard Money space, so it certainly helps to speak to multiple lenders or a broker. Many Hard Money lenders have their own criteria, risk-tolerance, and terms.
LuxePrivate Investments LLC 572 Reviews - 5moAJ ExnerPro MemberLender · Springfield, MO · Member since 2023 · 652 posts · 314 votes
Hey Samantha,
HML is a great method to keep capital a little more liquid.
Rates can certainly creep into the 12-14% range, but as competitive as the space has gotten, a lot of lenders are sitting in the 9.5%-10.99% interest-only with options to pay on only what you've used (non-Dutch) and can get you better leverage (~10% down) to keep money 'in your pocket'.
I've also used more 'line of credit' ways of rehabbing properties, and the downside is that if I am doing the work, I can't 'pay' myself out of my own line of credit. If I have a $3k demo budget, and I do all of the demo, the line of credit will only keep my interest payment a little lower whereas HM I can pay myself out of it once its reimbursed to keep the deal going.
There are certainly pros and cons to HML, but if you have the right connections they can be valuable in accomplishing what you are hoping to accomplish.
Good luck! Happy to connect and help if it would be helpful
- Member since 2023 · 73 posts · 24 votes5mo
Hard Money lenders are lenders, some registered with the NMLS some not. Some conventional lenders that do your typical Fannie Mae and Freddie Mac backed loans also do "non qm" or hard money loans. You also have lenders that just do "non qm" or hard money loans. Hard money or investor loans are a big part of the market right now.
Personally, I love the non qm or Hard Money lending space. When I discovered it I thought it was too good to be true! Lol and maybe some are...or were...but for me Hard money lenders have been great! I like the speed, less red tape, and quite frankly the competance. These lenders know time is money and they move fast only what they know will work. As far as "paying through the teeth on interest rates" ....some hard money lenders can be really high in interest, some are very competitive with conventional lenders investment loans.
Fix and Flip, DSCR, and Bridge loans all have their purpose and can be very advantageous to have these options in your arsenal.
As far as taking money from an individual person? No, these are usually mid to large size companys. A personal lender would be more of a "portfolio lender" or "private lender." Which are also extremely advantageous in real estate investing. Hope you found this useful! Best of luck! Feel free to pick my brain any time! I love nerding it up and talkin finance and investing! Lol
- 5moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 497 votes
Hard money lending is typically used to buy a property that will not qualify for conventional / debt to income (DTI) or DSCR financing because the property is not in a habitable or rentable condition. This means for example wholes in the floor or walls not just an older looking, functioning interior. If you're doing a BRRRR, its usually used in the first part of the cycle where you buy the property that is a fix and flip property and then use hard money for the purchase and the rehab. These loans are typically 12 months or more but can be paid of at any time but they are usually paid off more quickly than that.
Then once the property is rehabbed, it's either sold to a buyer to live in or rent or if the investor is keeping the property as a rental, the hard money loan (HML) is converted to a DSCR loan or a conventional loan that has a lower interest rate compared to a HML for longer term financing. Investors often will use a DSCR loan since it's structured based on the rents so there's less paperwork compared to a conventional loan which requires more income paperwork. Also, more importantly for many investors, there's a shorter seasoning time period or waiting time period between the last sale and the new transaction so that allows the investor to do a do a cash out refinance on the new appraised value more quickly compared to a conventional DTI income loan. That way the investor can get the money back sooner for new projects.
Hard money loan can also just mean any loan which is a much higher interest rate and a shorter term but they are generally used in the above scenario.
There are hard money loan options with up to 90% of the purchase price and 100% of the rehab done on draws including for new investors. The options generally will depend on the borrower's credit score and the location of the property. Large lenders that do these types of loans are licensed state by state and the options will vary based on where the property is located and also if it's in an area that the appraiser marks as urban, suburban or urban. If the property is marked rural it will generally have a lower LTV but this can vary by lender.
Advantages of hard money lending is getting money for a property that an investor will generally not get in any other way because of the condition of the property. They generally fund more quickly.
Disadvantages are that the rates and fees are higher compared to a DSCR or conventional loan and the loan has a shorter term compared to those loans so the loan will have to be refinanced or paid off with a sale in generally 12-24 months but can be paid off sooner. Happy to discuss further.
Bright Skyline518 Reviews- 5moJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Stacy Raskin:
Hard money lending is typically used to buy a property that will not qualify for conventional / debt to income (DTI) or DSCR financing because the property is not in a habitable or rentable condition. This means for example wholes in the floor or walls not just an older looking, functioning interior. If you're doing a BRRRR, its usually used in the first part of the cycle where you buy the property that is a fix and flip property and then use hard money for the purchase and the rehab. These loans are typically 12 months or more but can be paid of at any time but they are usually paid off more quickly than that.
Then once the property is rehabbed, it's either sold to a buyer to live in or rent or if the investor is keeping the property as a rental, the hard money loan (HML) is converted to a DSCR loan or a conventional loan that has a lower interest rate compared to a HML for longer term financing. Investors often will use a DSCR loan since it's structured based on the rents so there's less paperwork compared to a conventional loan which requires more income paperwork. Also, more importantly for many investors, there's a shorter seasoning time period or waiting time period between the last sale and the new transaction so that allows the investor to do a do a cash out refinance on the new appraised value more quickly compared to a conventional DTI income loan. That way the investor can get the money back sooner for new projects.
Hard money loan can also just mean any loan which is a much higher interest rate and a shorter term but they are generally used in the above scenario.
There are hard money loan options with up to 90% of the purchase price and 100% of the rehab done on draws including for new investors. The options generally will depend on the borrower's credit score and the location of the property. Large lenders that do these types of loans are licensed state by state and the options will vary based on where the property is located and also if it's in an area that the appraiser marks as urban, suburban or urban. If the property is marked rural it will generally have a lower LTV but this can vary by lender.
Advantages of hard money lending is getting money for a property that an investor will generally not get in any other way because of the condition of the property. They generally fund more quickly.
Disadvantages are that the rates and fees are higher compared to a DSCR or conventional loan and the loan has a shorter term compared to those loans so the loan will have to be refinanced or paid off with a sale in generally 12-24 months but can be paid off sooner. Happy to discuss further.
in oregon to do 1 to 4 units brokers and lenders must be state licensed and NMLS registered most folks that do this a business are in states ( 14 require licenses the rest do not) do not realize they cant make loans in Oregon or California or Nevada etc.. You will need to talk to a local company thats is licensed Like Iron Bridge in Portland or Kiavi is licensed there. I used to be an Oregon MLO and NMLS registered but have retired from that state..
If I was U i would be talking to the few local banks or Credit unions that might have a rehab product that automatically converts to long term financing. Try Summit Bank in Eugene I bank with them and they are business minded bank.. U will need cash though for any type of lending if you dont have 20% in cash plus reserves you are going to need to find a money partner thats just the reality of the bizz these days.
- 5moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 497 votes
I mentioned that property loan options vary state by state.
Bright Skyline518 Reviews- 5moJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Stacy Raskin:
I mentioned that property loan options vary state by state.
I know but many folks starting out have not clue and frankly many East coast mid west brokers have no clue either that states like OR CA NV require NMLS and state MLO to legally make loans .. you see it all the time.. lenders stating they make loans in all 50 states I submit there is very few if ANY that actually are licensed to lend in all 50 states for fix and flip loans. Kiavi Lima one some of the big ones might be but usually when you check them out there will be a handful that the demand does not warrant getting a license in that state like the Dakotas.
- New to Real Estate · Los Angeles, CA · Member since 2023 · 83 posts · 29 votes5mo
Best simple way I’ve heard it explained is bank money is cheaper and slower, hard money is faster and more expensive. Usually makes more sense for flips or short-term plays than long holds. Can be different for some people though
- Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 408 votes5mo
Hard money lenders may require additional insurance costs. If they want to have their own title insurance policy then you pay double at closing
if they want to be included on the property insurance then claims you may file will get more complicated
- 5moJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votesHey Samantha, welcome to BP! Hard money lending is a short-term loan from a private lender or company where the deal and property matter more than your credit or income, so yes, it’s often individuals or private groups instead of banks. Investors usually use it for flips or quick purchases because you can close fast and with fewer requirements. The upside is speed and flexibility, but the downside is higher interest rates, upfront fees, and shorter terms, so it’s more expensive and you need a clear exit plan like selling or refinancing. It’s a solid tool if used right, just make sure the deal numbers work going in.
Quote from @Samantha Chacon-Johnson:
Hello all,
I am wanting to learning more about hard money lending. What is hard money lending? How does it work? Instead of a bank/mortage loan, are you taking a loan from an individual with capital?
Has anyone go this route instead of traditional loans to purchase a property? What was the advantages? What were the disadvantages?
Samantha
Jimmy Lieu, Red 1 Realty4.9120 Reviews - 3moGarrett CrosbyPro MemberReal Estate Agent · Los Angeles, United States · Member since 2021 · 392 posts · 162 votes
Good thread. A lot of solid info here already. I want to flag one thing specifically for Samantha's scenario since it's the actual deal question buried in this thread.
You said the mortgage would be around $1,800/month and you could rent for $2,000-$2,500. That's a thin spread — $200 positive cash flow at best before you account for vacancy, repairs, property management, and insurance. Once you add those in, most investors use a 40-50% expense ratio rule of thumb on gross rent, which means your actual operating costs eat most of that gap. You need that rent to land at the $2,400-$2,500 end to have anything left, and that assumes the hard money refi into DSCR works cleanly.
Also: hard money lenders typically still want 10% down plus closing costs, which is real money even at that level. And Jay's point about Oregon licensing is important — make sure whoever you talk to is actually licensed to lend in Oregon for 1-4 unit residential deals.
Run the full numbers on this one before you commit. If it pencils at $2,400+ rent and you have the capital for the down payment and holding costs, it could be a good deal. But the margin is tight enough that you want to be sure. Happy to DM if you want to work through the full cash flow analysis.
- Rental Property Investor · Boynton Beach, FL · Member since 2014 · 273 posts · 197 votes3mo
Yes, that is all I do. Haven't had a traditional loan since 2017. All my deals are financed through DSCR lenders and private lenders. DSCR lenders are the easy button in my opinion if you don't have anyone in your network that wants to private money lend. DSCR lenders offer fix n' flip loans, purchase, cash-out refi. Over the past 10 yrs I have gone threw a few of them before settling on two that are solid operators because not all of them are. Service is just as important as terms. Happy to refer anyone that needs.
- 3moDarren KurilkoPro MemberLender · Venice, FL · Member since 2025 · 15 posts · 0 votes
Hi Samantha!
Welcome to the investing side of things. At its core, hard money is an asset-based loan, meaning the lender cares more about the value of the property and the deal's numbers than they do about your personal W-2 income or DTI.
The biggest advantage is speed and flexibility — hard money lenders can often fund a deal in a matter of days or weeks and will cover the renovation costs, which traditional banks usually won't touch if the house is distressed. The disadvantage is the cost; interest rates are higher (usually 10–14% ) and you'll pay origination points upfront. It's meant to be a short-term tool (6–12 months) to acquire and fix a property before you either sell it (flip) or refinance it into a long-term loan (BRRRR).
Happy to answer any specific questions if you want to connect!
- Lender · Nationwide · Member since 2024 · 76 posts · 23 votes2mo
Quote from @Samantha Chacon-Johnson:
Hello all,
I am wanting to learning more about hard money lending. What is hard money lending? How does it work? Instead of a bank/mortage loan, are you taking a loan from an individual with capital?
Has anyone go this route instead of traditional loans to purchase a property? What was the advantages? What were the disadvantages?
Samantha
Hi Samantha, welcome to the real estate investing side of things!
At its core,hard money is an asset-based loan. Traditional banks qualify you based on your personal W-2 income and tax returns, but hard money lenders care primarily about the value of the property and the strength of the deal. It is an incredibly powerful tool for properties that traditional banks won't touch due to distress, or when you need to close fast to compete with cash buyers.
However, because hard money comes with higher interest rates and upfront origination points, it is strictly a short-term tool meant to bridge the gap while you acquire and renovate the property.
Looking closely at the single-family property you mentioned, you have a great advantage since the repairs match your skill set. That being said, you will want to look very carefully at your exact math before diving in:
- The Down Payment: While hard money provides great leverage, almost all lenders will still require a down payment—typically around 10% of the purchase price, plus upfront closing costs and reserves.
- The Cash Flow Margin: You mentioned an estimated mortgage of $1,800/month against a rent of $2,000 to $2,500. If the rent lands on the lower end ($2,000), a $200 spread is exceptionally thin. Once you factor in standard operating expenses like capital expenditures, future maintenance, vacancy, taxes, and insurance, you could easily find yourself in negative cash flow. You really need the rent to hit that $2,400+ mark to make the numbers safely pencil.
- The Exit Strategy: You never want to take a short-term hard money loan without a clear exit plan. Since you plan to hold this as a rental, your exit strategy will be a BRRRR strategy. Once the property is rehabbed and a tenant is placed, you will need to immediately refinance out of the hard money loan and into a long-term, 30-year fixed loan.
Make sure to run a full cash-flow analysis factoring in all your holding costs and your permanent refinance rates before making an offer.
Best of luck with your first deal!
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