Explanation of hard money lending.

[Walmsley Gedeon]

I need to understand what hard money is and how can it be used successfully to fund your first multi family? What are the pitfalls? I just need to be educated on this as much as possible because securing a deal in NJ with FHA seems impossible with all the cash investors. Thanks in advance all!

[Odie Ayaga]

Hard money is funds to purchase a property secured by the investment itself so there is less of an emphasis on the borrower's ability to pay and more on the quality of the asset being purchased. It typically comes with much higher interest (e.g. 12-15%) than you would see conventionally as well as points. It's typically more desirably for a short-term exit strategy of selling or refinancing. The biggest pitfall in using hard money for buy and hold is the risk of refinancing as an exit strategy. If you run into trouble finding a bank willing to refinance it could be EXTREMELY costly. Check out Ann Bellamy's podcast for a good intro. I can post the link when i get home