What is the point of hard money if you need a downpayment for it?

[Mason V.]

I have talked to three hard money lenders today and each wanted 20%-40% down for a rehab. I understand the idea of having skin in the game. But, If I am going to be putting that much down I might as well just get an FHA 203 loan when I qualify in eight months. The down payment, to my understanding, kind of defeats the whole purpose of using hard money to begin with. I am really running out of options. May have to break down and find a partner, really not something I want to do. Although, there's also REITs.

[Paul Higbie]

Explaining the benefits of using hard money is sort of like having to explain your jokes (because they are not funny).  An investor needs to know the following, and then it will make the decision to use hard money a lot easier:

• Use less of your own cash than a bank
• Close quickly, and use that as a negotiating tool
• Keep all of the profit, rather than splitting with a partner
• Stay in control of your deal, rather than having a partner to answer to
• Borrow the repair funds

Wash, rinse, repeat.

Hard money is not the solution to every financing question but as an investor you need to understand the proper uses for hard money and then it becomes a simple analysis of your particular situation.