Why “Hard Money”?
Hard Money fills the gap where banks can’t or won’t lend. Property that is vacant and needs repairs is generally not eligible for conventional financing. As an investor, you must then come up with cash to buy, rehab, and hold until sold or rented and refinanced. This can make it impossible for the new investor and limits the number of projects that the experienced investor can accomplish.
Another common issue for the investor is the time it takes to obtain the loan. Hard Money Loans can be completed in as little as 7-10 days, allowing the investor to make a cash offer.
Since the risks are greater, the interest rates are higher. The investor must understand the terms and ensure their project plan is realistic.
Typical terms for these loans require the property to be vacant, a first position on the deed, loan limited to 70% of the After Repair Value (ARV), 2-5 Points, and Interest rates of 13-15%.