Hard Money is a Scam
Many years ago, a rumor spread that hard money is a scam.
It all started with a real estate investor who could not qualify for a bank loan, so they turned to a hard money lender. Unfortunately, this real estate investor didn’t understand how hard money worked. So they had a bad experience. Like, really bad.
After that, they told ALL of their friends, “Hard money is a scam.”
And then those friends told their friends the same thing, even though they themselves had never used a hard money loan.
The rumor spread quickly. For miles and miles, investors caught wind of the false news that hard money wasn’t good for them or their wallet. One by one, they turned their back on this loan option and struggled to find another. And they lost a lot of money.
All because one investor had a bad experience. A bad experience that could’ve been prevented had they done just a little bit of homework.
Because here’s the truth. Hard money is NOT a scam.
It’s actually a genuine, honest-to-good option for investors who:
- Can’t qualify for a bank loan.
- Need to close deals fast.
- Want to save money by avoiding extra costs for things like appraisals and inspections.
- Or all of the above.
So, what gives hard money such a bad rap? Well, most of the time, it’s because real estate investors jump into a hard money loan without understanding it.
So, what is hard money?
Well, it isn’t like your normal bank loan.
Bank loans are usually long-term. Like, 15-30 years. Hard money, on the other hand, is intended to be short-term, like 3-6 months. If you keep a hard money loan longer than a year, then you’re not really using it correctly. Because, yes, hard money lenders charge higher interest rates than banks. There’s no denying that. And you don’t want to pay those rates longer than you need to.
That’s why it’s so important to have a plan to flip or refinance a property before entering a hard money loan.
Another major difference between bank and hard money loans is the closing process. Bank loans take at least a month to close. They also require more paperwork and fees to make that closing happen.
Hard money loans can close in just a few days and require far less, well, requirements. You don’t need to worry about appraisals and inspections and other costs that don’t get taken into account with bank loans.
That’s why they’re perfect for fix and flips, rentals, and other value-add properties. You can find a great property, bid on it, and buy it FAST.
Basically, hard money is an excellent tool to help investors compete in a very competitive real estate business.
It’s not a scam.
And anyone who claims it to be scam has either never used it because they listened to the false rumors that spread many years ago. Or they’ve used it, but they didn’t use it right.
To learn how to use hard money right, check out some of our other videos on our Youtube channel.
Our team strives to help investors understand hard money so they can buy the properties they want, when they want…and without hurting their cash flow.