Hard money loans are short-term, asset-based loans primarily used by real estate investors for fix-and-flip projects, bridge financing, or when traditional financing isn't available or fast enough.

Key Characteristics

• Speed: Can close in 7-14 days vs 30-45 days for traditional loans
• Asset-Based: Approval based on property value, not borrower credit
• Short-Term: Typically 6-24 months
• Higher Cost: 10-15% interest + 2-4 points typical
• Flexible: Can finance distressed properties banks won't touch

Common Use Cases

• Fix-and-flip projects
• Bridge loans between property purchase and sale
• Cash offers on competitive properties
• Properties needing major repairs
• Time-sensitive opportunities
• Borrowers with credit issues but strong deals

Evaluation Criteria

• ARV Accuracy: After repair value drives loan amount
• Experience: Track record helps with terms
• Skin in the Game: Down payment shows commitment
• Exit Strategy: Clear plan to repay loan
• Location: Property marketability matters

Tips for Success

• Have 20-30% down payment ready
• Get accurate repair estimates from contractors
• Build relationships with multiple lenders
• Have backup exit strategies
• Factor in all carrying costs
• Leave room for cost overruns