Hard Money Loan
Short-term, asset-based loans from private lenders — used for acquisitions and rehabs when speed matters.
Definition
Hard money loans are short-term (6–24 months), high-interest loans from private lenders or hard money companies, collateralized primarily by the real property rather than the borrower's creditworthiness. They close fast (often 5–10 business days), require minimal documentation, and are designed for investors.
Hard money lenders typically fund 65–80% of the property's value (either purchase price or ARV depending on the lender), charge 9–14% interest, and 1–4 origination points. Some lenders also fund a portion of rehab costs, disbursed in draws as work is completed.
The main advantage is speed and flexibility — critical when you need to close fast to win a deal. The main disadvantage is cost: high interest rates and points mean hard money should only be held for short periods. Experienced investors use hard money to acquire, then refinance into long-term conventional financing once the property is stabilized.
Related Terms
Bridge Loan
Short-term financing that bridges the gap between purchasing a property and securing permanent financing.
Private Money
Loans from individual private investors — usually friends, family, or high-net-worth individuals — secured by real property.
Loan-to-Value (LTV)
The ratio of a loan's balance to the property's appraised value, expressed as a percentage.
Points (Origination Points)
Upfront fees paid to a lender, equal to 1% of the loan amount per point.
BRRRR Method
Buy, Rehab, Rent, Refinance, Repeat — a strategy to recycle capital into multiple rental properties.
Fix and Flip
Buying a distressed property, renovating it, then selling it quickly for a profit.