Hard money lending is relatively secure since you can hold the borrower’s assets as collateral.There is a margin of safety as hard money lenders typically lend 65% to 70% LTV (but see point below about less risk equating to less reward).

The actual work of rehabbing and building is someone else’s problem. Some people are better suited to be financial managers/lenders than they are to do the actual work on the property.

You can expect a relatively high return on your investment as compared to bank investments or bonds.

Here are a few pros and cons to consider: Related: The Ultimate Guide to Hard Money Loans Considering Becoming a Hard Money Lender?

Most often used for residential properties but can also be used for commercial real estate.

Commonly used for fix and flips but can also be used to build new properties or purchase and hold.

There are many varieties when it comes to hard money loans, but most have the following characteristics: In both cases, time is critical.īorrowers want to complete the project as quickly as possible, so they can repay the loan and turn their project into profit. The borrower’s objective is usually to purchase and then fix and flip or, in the case of new construction, build the property and sell. Loans available from a hard money lender are known as hard money loans, private money loans, rehab loans, or bridge loans. The loan is generally secured by a note and deed of trust.

The term “hard money” is used because the lender focuses more on “hard” assets (the real estate) when evaluating a deal versus the borrower’s ability to pay as indicated by income or credit score. In case you are new to this term, a hard money lender, also known as private money lender, is a non-institutional (non-bank) individual or company that provides loans to real estate investors (borrowers) for the purchase or construction of properties. If direct investment isn’t for you or if you are already an investor but want to add some diversity and expand your reach, one option is to look at getting in on the other side of the real estate investment equation-as a hard money lender. While these are the most popular ways of participating in the real estate investment market, there are other options. When most people think of real estate investing, they tend to think of direct investing: buying property to fix and flip or hold for long-term rentals.

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