Pros/cons of conventional vs hard money?

[Chris K.]

What are some of the pros and cons of going with hard money / private lending vs conventional for a second home/ investment, rental property??

[Nathan Gesner]

Hard money lenders typically charge a much higher interest rate and are better suited for short-term loans. An example would be borrowing $200,000 at 12% interest then using the money to purchase a $120,000 home, spending $80,000 on renovations, and selling the house for $260,000 and making a $60,000 profit.

You could also use a hard-money lender and pay the higher rate just because you can't qualify with a traditional lender. After a year of ownership, you could qualify with a traditional lender, refinance, and bring the interest rate back down.