should i use hard money to grow quicker

Question

i want to possibly use hard money this year to grow quicker   and can you use them for new builds  who should i use and  any tips?   ( im in Wisconsin )

Ryan Blake · Answer

@Sabian Ripplinger I agree with what @Noah Wright is saying. Call up a couple companies. If they don't have time to get on the phone and speak with you to explain how they work, then they will be even more difficult to get ahold of once they already have your business. Below are some key questions I would suggest asking.

Are you a direct lender?

This will be a gateway question. If the answer is no, that means they are a broker of some type. Typically this means they will take longer to close, may not have all the information for the companies they work with,  and most hard money brokers get their money by taking an existing product and adding extra points to pay their fee.

What is your investor success rate?

Another way to ask this is what is your default rate. This is important to know. Many don’t track this statistic as closely as they should which is why many lenders go under. I think it is probably the most important stat. You want to make sure they are at or below 5% to make sure they are able to stay solvent. You don’t want your lender to go out of business while still holding your construction escrow funds.

Can you provide me with the contact info of some recent borrowers?

Any good HML will be happy to share the contact info of borrowers so you can see how easy the process was and how well they treated the investor.

Can you share a recent closing document or HUD?

This will show you more evidence of the fees they really charge. Not all lenders will share this as they will need to get approval from the borrower before providing. If not, at least make sure that you get a term sheet. This should put in writing what the fees will be.

What is your maximum LTC and LTV?

LTC is sometimes referred to initial funding. This is the percentage of costs (purchase and rehab) covered by the loan. A general range tends to be 85% to 100% covered. LTV is normally expressed as a percentage and that percentage is of the ARV. A general range tends to be 65% to 75% of value. Lenders will lend the lower of the amount between LTC and LTV.

Do you require an appraisal and survey?

Most HMLs will require these. I am wary of the ones that don’t require an appraisal. Lenders that don’t require an appraisal will perform a desktop appraisal but will typically have a very conservative view on the value of the property to protect the company’s investment. This means you will be coming out of pocket more. Survey is a toss-up on whether or not it will be required. Know that every long term lender will require a survey and if something comes up on it when you are trying to sell or refi, you could get stuck in hard money without an easy or quick way to get out.

Is there a pre-payment penalty?

Some will require you to pay the interest through the term or another length no matter how long you hold the loan. Just make sure that you include this requirement in your costs.

What is your draw fee & benchmarks for the repairs portion of the borrowed money?

Know what your fees will be to take out the repair money borrowed. Draws are almost always held back until you reach certain points in the project or that work is completed. They will also charge you to have an inspection by a 3rd party or to use an app to make sure the work is done. I have seen this range from as low as $100 up to $300.

Do I need to pay anything before sitting at the closing table?

There have been numerous people on BP talking about how they paid application fees but they could never get their loans closed on any deal brought to the company. This is a practice by some less than reputable companies. One I saw charged $500 upfront to be pre-approved and would never actually fund any loans. Just beware. Most reputable HMLs will not charge anything until you are sitting at the closing table and all fees will be listed on the HUD-1 closing document.

And of course, what are the points, interest, and attorney/document/admin fees for the loan?

This will vary based on region but in general 2 – 5 points, 9% - 16% APR (meaning this is the annual rate so divide it by 12 to get the monthly interest amount), and documents fees can be from $600 – $1,900. The document fees are what will vary wildly from company to company. Just know them going in so that you can properly budget. You will also want to find out if payments are interest only or if some principal is built in. Most hard money will be interest only payments on the full approved balance of the loan whether or not if you have pull the draw funds for repairs.

If you have any other questions, post them in the same thread below so that we can all learn from the answers.

David Jesperson · Answer

Hi Sabian,

I'm located in Wisconsin as well. Good Faith Funding is a popular hard money lender in my area (Green Bay) that lends statewide. I'm unsure if they lend on new builds or not, they do have a website where you can set a virtual meeting with them.

https://www.goodfaithfund.com/

Jay Hinrichs · Answer

out of 100 HML maybe 5 do new builds.. and zero will do loans for someone with no experience so that is going to be the key if you have experience or not.. if not they then like to see an experienced GC on your team.  Lima One does verticle in many markets you can check with them. Best bet though is a local community business bank..

Charles Clark · Answer

@Sabian RipplingerAbsolutely — hard money can be a great tool for scaling quickly, especially if you have deals lined up with strong ROI. Yes, many hard money lenders do fund new construction, but terms can vary, so make sure they have experience with ground-up projects. In Wisconsin, check out lenders like Civic, Lima One, or Do Hard Money, and definitely ask local investors for referrals too. Tip: always have your exit strategy clear and budget for interest-only payments during the build. Happy to share more if you’re diving in!

Jeb Durgin · Answer

Yes, you can use hard money for new builds, but not all lenders offer that—look for ones that specifically do construction loans. In Wisconsin, check local hard money lenders or national ones like Kiavi or Lima One (but always confirm they do new construction).

Hard money = professional lenders, higher rates, fast approvals.
Private money = individuals (friends, investors), more flexible terms but relationship-based.

Tips:

• Have your numbers, budget, and exit strategy ready.
• Ask about draw schedules and points.
• Join local meetups or REIAs to get referrals.

Have your numbers, budget, and exit strategy ready.

Ask about draw schedules and points.

Join local meetups or REIAs to get referrals.

Happy to share lender names I’ve used—DM me!

James McGovern · Answer

Avoid using hard money. Find a private money lender as it will be easier to scale

Mike Klarman · Answer

You can be a hybrid buyer.  You can buy for cash and then go to the lender after the fact.  You have 6 months post purchase to apply for a bridge loan and get cashed out of the property and receive rehab funds.  Cash will always get you the best price so you may as well take advantage of it and get ahead of the game.

But yes, Hard Money is useful if:

1) You have the operating capital to always fill in low cashflow cycles and afford to always have capital tied up in property.

2) You are in the right projects, your choice for investment is good.  You stay under 70% project cost to ARV which allows for the best terms

3) You have a good team you can trust who rehabs and sells for you in a timely manner with quality results

4) Keep your credit north of 700 for best rates

Darrin Carey · Answer

I was able to grow my flipping business and build a rental portfolio by using Hard Money Lenders.I found it was easier to work with local private money / hard money lenders than the national lenders. Local people get to know you and your business and often have a real estate investing background. They can become a person to help you grow, not just lend you money.

Charles Clark · Answer

@Sabian Ripplinger Yes, hard money can be used for new construction — just make sure the lender handles ground-up projects.

Look for lenders familiar with Wisconsin (check out Lima One, Kiavi, LendingOne, or local options).Be ready with your numbers: ARV, budget, and timeline matter.Rates are higher and terms shorter — plan wisely.First time? Start small to build a solid track record.

Need help finding a lender or running the numbers? DM me — happy to help!

Marcus Auerbach · Answer

Hard money is expensive and rigid. Private money from friends and family is much better.

That's how I got started. We had plenty of foreclosures in Milwaukee back then, but banks would not lend.

If you let enough people in your circle know what you are doing and that there would be an opportunity to co-invest with you - there will be some who have an interest in real estate, don't trust the stock market and would like to make a little more than on a CD. They don't need to be rich. More people than you know have 50k or 100k in a retirement fund and would be happy to invest with you. This will take time to cultivate, talk about what you do, be excited about it, provide an opportunity - don't ask for money, they will ask you if they can invest with you. Of course, the responsibility is enormous, you have to make sure that no matter what, they get paid.

But the funny thing is they often don't want their money back after a project is refinanced, instead, they want to give you more.

should i use hard money to grow quicker

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