Why do people use hard money lender?

[Michael Y.]

Fairly basic question, but want to understand a few of reasons. Are people just using them to purchase cash only properties? Or are you they using them because the bank won't lend to them? What's the typical LTV on a hard money loan (ballpark as I know it's case specific)

If it is a cash only property do people use hard money and then refinance with traditional financing after rehabbed and stabilized?

Lastly, people mention that hard money lenders only finance people with a track record. How do you show your track record? Do you need an LLC?

[Ellis San Jose]

Hard money is used because it is usually a much faster process & also can be used with properties that in the current condition won't qualify for traditional loans.

65%-75% of ARV is the typical range but it varies lender to lender.

Flippers will use hard money to acquire the property & fix it up to resell.
Holders will use hard money to acquire quickly then switch to bank financing to keep it for a rental.

There are so many different hard money lenders and guidelines.  Some will lend if they feel there is enough protection for their capital regardless of your experience. They may watch the release of funds more closely for oversight.