We’re hard money lenders. We obviously think there’s a place for what we do. But we also see operators using hard money for the wrong deal, and we see plenty of operators avoiding hard money on deals where it would have made them money.
Here’s an honest read on when it’s the right tool, when it isn’t, and what changes the math.
When hard money makes sense
Hard money is for short holds where speed and certainty matter more than cost of capital. The clearest cases:
You’re under contract and the clock is running. A wholesale assignment with a 21-day closing date won’t survive a bank’s 45-day underwriting. If you don’t close on time, you lose the property. Hard money buys you the deal.
The property needs work the bank won’t fund. Banks don’t lend on properties that need a roof, an HVAC system, and a kitchen. A hard money lender will fund the acquisition and the rehab, because we underwrite the as-is value and the ARV, not the current condition.
Your income picture is messy. Self-employed, multiple LLCs, recent year-over-year swings. Banks want clean W-2s and two years of tax returns. Hard money lenders underwrite the property and the borrower’s experience, not the borrower’s W-2.
You’re buying vacant for a future refi. Bridge financing on a property that will refinance into a DSCR loan once it’s tenanted. Banks won’t lend on vacant. We will.
You need leverage on a portfolio acquisition. Bundle deals where speed and confidence of close matter more than rate.
In any of those scenarios, the math is straightforward. Your alternative isn’t a cheaper bank loan. Your alternative is missing the deal entirely.
When hard money doesn’t make sense
Long-term holds. If you’re buying to hold for five years, a hard money loan at 11 percent that refinances into a conventional loan at 7 percent is fine for the first six months. But operators sometimes hold the hard money loan too long, hoping for a refinance window that doesn’t come. That eats the spread fast. If your exit isn’t real, the loan you take to close becomes the loan that buries you.
No clock and no special circumstances. If you have 60 days, clean W-2s, and a property in standard condition, get the bank loan. We’re not cheaper. We’re not trying to be.
Owner-occupied. We don’t do consumer loans. Different regulatory regime, different product entirely. If you’re buying a house to live in, you need a conventional mortgage.
Raw land with no clear development path. Some hard money lenders do this. We generally don’t. The exit is too uncertain to underwrite.
The hidden cost of using the wrong tool
The expensive mistake isn’t using hard money. It’s using it for the wrong deal. We’ve seen operators take a 12-month hard money loan on a hold strategy, planning to refinance “soon,” and end up paying interest for 14 months when their DSCR refi got delayed.
The other expensive mistake is going the cheap route on a deal that needed speed. A bank loan that takes 50 days to close on a property you needed to close in 30 isn’t cheap. It’s zero, because you don’t own the property.
The right question isn’t what’s the cheapest loan. It’s what’s the right tool for this specific deal at this specific timeline.
A quick framework
Ask yourself three things.
- What’s your timeline? Under 30 days to close, hard money. Over 45 days with clean docs, bank.
- What’s the condition? Move-in ready, bank. Needs real work, hard money.
- What’s the exit? Specific and within 12 months, hard money is fine. Vague or over 18 months, refinance into something cheaper as fast as you can.
If you’re still not sure, send us the deal anyway. We’ll tell you straight whether we’re the right call or whether you should go to a bank.