Hard Money Loans Uncovered

What are hard money loans? How do they work? Where can I find hard money lenders?

In this post I will cover the answers to those questions.

What Are Hard Money Loans?

A Hard Money Loan is a short term loan that many real estate investors use to fund the purchase of real estate. The types of loans are most commonly used by rehabbers (flippers) that need to fund their projects until the renovations are completed, then they sell the property and pay back the loan.

Hard money loans can also be used for constructions loans, land loans, when a buyer has bad credit or needs to close quickly.

How Do They Work?

These loans are usually based on the value of the property you are buying unlike most traditional loans. Many hard money lenders do not even look at your credit score. On the flip side, these loans are expensive loans.

The going rate for hard money loans is around 10-14% interest rate with 2-4 points (2-4% fee based on loan amount) as well. These loans can be funded much faster than traditional loans, usually within 7-14 days and sometimes in as little as 3-4 days.

Depending on the value of the property that you have under contract, you may even be able to obtain a hard money loan for 100% of the purchase price.

There are times where hard money lenders will even cover a portion of the repair costs as well. For the most part though, you will need to have “skin in the game” (bring some of your own money to the table).

Where Can I Find Hard Money Lenders?

A great place to find hard money lenders is networking at your local Real Estate Investment Club. There are often hard money lenders there networking as well, looking to find prospective borrowers.

Many clubs allow flyers to be placed out and you may find some placed by hard money lenders. Talk with other investors and see who they have used and would recommend. You can also google “Hard Money Lenders” followed by your city or “Private Real Estate Lenders”.

If you are looking to get into flipping houses, it is very important to start building relationships with hard money lenders now and get to know the processes very well. These lenders can be an intricate part of building your house flipping business.

Here's to your success!!!