Hard money is short-term, asset-based financing for flips. It costs more than a bank loan because it is fast and flexible. Compare points, rate, draw process, and prepayment terms, and make sure the deal still works after all fees.
Hard money lets you buy and rehab quickly when a bank loan will not work. It is a tool. Used well, it helps you close and scale. Used badly, it eats your profit.
What it is
A hard money loan is short-term financing from a private lender, secured by the property. The lender looks mainly at the deal: price, repairs, and ARV. Your experience and reserves matter, too.
Typical structure
Short term, often measured in months, not years
Interest-only payments during the loan
Origination points at closing
Rehab funds often released in draws as work is completed
Loan limits based on purchase price and ARV
Terms vary by lender. Get quotes from several and compare them side by side. Rates and points run well above conventional loans.
What to ask every lender
What are the rate, points, and all fees?
What percentage of purchase and of rehab do you fund?
How do draws work, how fast, and are there inspection fees?
What are the term, extension options, and costs?
Is there a prepayment penalty or minimum interest?
What do you need from me to approve?
How fast can you close?
Put it in your deal math
Add these to your budget:
Points at closing
Monthly interest for the whole hold
Draw and inspection fees
Extension fees if the project runs late
Title and closing costs
If the deal only works at the best case, it does not work.
How to use hard money smartly
Line it up before you need it. Get pre-approved for a range.
Keep your own cash for repairs overruns.
Build a timeline with room to spare.
Have an exit plan: sell, or refinance into a rental loan.
Build a relationship. Repeat borrowers get better terms.
Common mistakes
Choosing the lowest rate and ignoring points and fees
Underestimating the rehab timeline
No reserves
Counting on an ARV you have not tested
Next step
Call three lenders, ask the seven questions above, and put each quote into the same spreadsheet. Pick the lender whose total cost and reliability fit your deals.
How I can help you do this
See the proof first: review my full track record and the before and after projects. Then join the investor list if you want to work together.
I have done 200+ flips, so I have worked with hard money on both the good and the painful ends. I am not a lender, but I help you use it well:
Stress test the deal with points, interest, draws, and extension costs included.
Build a realistic rehab budget and timeline so you do not blow past your term.
Point you to lenders investors use and help you compare quotes side by side.
Plan the exit, whether that is a sale I help you list or a refinance into a rental.
If the deal only works at the best case, I will tell you before you sign.
This is education, not financial advice. Read your loan documents carefully and have an attorney review if you are unsure.
Originally published on Equity Edge Orlando.