Cash or Hard Money to Finance Your Deal?

[Vincent Brunetto]

So I’m an agent/wholesaler in the Greater Philadelphia area that works with investors that use both of these financing options when buying properties from me. I always flip flop which I would prefer my Investors use. I understand that everyone's financial situation is different but I'm just speaking generally here. Obviously cash is king when it comes to having a smooth closing. There are no issues with lenders being ready on time or an appraisal done that has comps that are pulled from a mile or two away (Yes, this has happened to me). However, when my buyers use hard money, it frees up capital so that they can get multiple projects going at once.

When it comes to hard money, you eat away at your profit margin with interest, inspection fees, and origination fees. However, you are putting less out of pocket and leveraging someone else's money to get your deal done. So there’s a tradeoff between profit and risk exposure. Also, there are a ton of lenders out there and not all are the best. So it is definitely important to have a couple of lenders in your pocket that are quality and offer fair pricing, which I do have.

I have a few questions for the BiggerPockets community…

What is your preferred way of financing deals?

If you have used hard money, what was your experience like, and will you continue to use this method in the future?

If you use both methods, what is the deciding factor when evaluating your deals?