FINANCING

Hard Money Loans: When They Make Sense (And When They Don't)

Updated March 2026

What Hard Money Is

Short-term, asset-based loans secured by real property. The lender cares about the property's value and your exit strategy, not your W-2 income. Terms: 12-18 month duration, 10-14% interest, 2-4 points in origination fees, 60-70% LTV. On a \$100K property, you borrow \$65K, pay \$2,600-3,250 in points upfront, and \$540-760/month in interest. It's expensive money. The question is whether the deal justifies the cost.

When It Makes Sense

Fix-and-flip: buy at \$80K, rehab \$30K, sell at \$150K in 6 months. The \$8-10K in hard money costs is a fraction of the \$40K profit. BRRRR: buy distressed, rehab, rent, refinance into permanent financing within 6-12 months. The hard money is a bridge — you're not holding it long enough for the interest to compound. Speed: hard money closes in 7-14 days vs. 30-45 for conventional. If the deal requires fast closing, hard money is the tool.

When It Doesn't

Buy-and-hold with no refinance plan. If you borrow hard money at 12% and can't refinance for 18 months, the interest alone on a \$100K loan is \$18,000. That destroys any cash flow the property generates. Also doesn't work if your ARV assumptions are wrong — hard money lenders will foreclose quickly if you can't repay, and you lose your entire investment.

Finding Lenders

Local real estate investor meetups are the best source. Hard money is a relationship business — local lenders who know the market can move fast and sometimes offer better terms than national online lenders. Also check REIA groups, BiggerPockets forums for your market, and ask other investors who they use. Get quotes from at least three lenders and compare total cost (points + interest over your expected hold period).