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How Hard Can Hard Money Be? An Asset-Based Alternative Method for Financing Single-Family Home Inves

If you are looking to fund your first or next single-family home investment, you may have heard of a “hard money” loan.

If you’re in need of funding and lack the time or credit score for a traditional bank loan, a hard money loan may be the answer. Hard money loans and commercial bank loans are the two most common ways of obtaining money to invest in real estate. Is a hard money loan from a private investor right for you?

Hard Money Loans Are Valued on the Property, Not on Your Credit

A commercial banker will check your credit, business history, income, references, work history…at minimum. Hard money lenders don't care much about any of that. Many don't care if you have no credit, bad credit, or a bankruptcy. They do, however, want to know what the property is worth now, and what it will be worth after you rehab it. Expect them to inspect the property.

Hard Money is Faster

When speed counts – if you’re competing for a below-value distressed property - hard money may be your answer. Loans may fund in a few days. Traditional bank lenders? Many weeks, or many months.

Hard Money is Expensive

Hard money is not for the faint of heart. Typically, if the general interest rate range for bank home loans is 5% to 7%, the range for hard money loans may be 15% to 17%. Plus, expect to pay points, from 2-10 points, to get the money. One point equals one percent of the mortgage amount. (1 point on a $100,000 loan is $1,000.) And some hard money loans may have pre-payment penalties.

Hard Money is Strict

Lenders likely won’t lend you the total value of the home, or anywhere near it. They may only loan up to 70% ARV (after repaired value) of the property. This means that the lender may loan you up to 70% of what the home is worth in repaired condition. For example, let’s say you find a house worth $90,000 as is; you plan on spending $40,000 for repairs; and its market value after repair is $200,000. Your friendly hard money lender may lend you up to $140,000, which would cover the cost of the house and the repairs.

Default on a hard money loan? Say goodbye to the property. You can expect a quick foreclosure.

Hard Money is for Flippers

Hard money is for short-term loans; the repayment perion is generally between three to six months. So hared money may be best for flippers. If your investment objective is to rehabilitate a home, and to produce current monthly income and long-term capital appreciation, as it is for SpringView Investments, then hard money is likely not for you.

For more information on why your should consider investing in a professionally managed portfolio of single-family homes, please contact Harold Willig at 917-209-4452 or

Harold Willig is the Manager of SpringView Investment Management, LLC, which he founded in 2012. Mr. Willig also served as HFZ Capital Group’s Chief Financial Officer, and was responsible for the oversight of HFZ's Finance and Accounting team. He has over 16 years of finance and accounting experience. Mr. Willig also ran a consulting practice and provided valuation, analysis, and transactional support services to multi-billion dollar real estate companies. Previously, Mr. Willig served as the Senior Controller and Vice President of Financial Analysis and then the Chief Financial Officer of the Athena Group, a multifamily development company and fund manager.

This post does not constitute investment, tax, legal, or real estate advice. It is not a recommendation or an offer to buy or sell. No warranties implied. Past performance does not guarantee similar future results.

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