Hard money loans

[Kurt Heise]

Why do so many succesful real estate rehabbers use hard money loans when they buy a home to flip? I'm wondering why they don't use their own capital to avoid costly interest rates.

[Ann Bellamy]

Most of my most experienced borrowers keep a significant amount of capital for contingencies and multiple deals. They are only using their own cash when needed and keep the rest for hidden problems, which happen all the time. If you have 6 deals going at the same time in various stages, it's hard to pay cash for all of them and still have cash if another great deal comes along. So that's why they use hard money for the bulk of their purchases, and only use hard money if the deal supports it.