Why a 12% Hard Money Loan Can Cost You LESS Than 8.5%

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At first, it sounds crazy. Why a 12% Hard Money Loan Can Cost You LESS Than 8.5% does not seem to make sense. However, once you break it down, it becomes very clear. The truth is, the interest rate is only one part of the total cost. You also have to look at fees, points, and most important, time. Because of that, a higher rate loan can actually put more money in your pocket on the right deal. So, let’s walk through a simple example to show you how this works and how you can use it to protect your profits.

What Is Hard Money (and Why It Matters)

Hard money is simple. It is a loan backed by real estate. However, it works very different than a bank. Instead of focusing only on your income, it focuses on the deal itself. Because of that, it can move fast, which helps you win deals that others miss. In addition, it stays flexible, so it can fit projects that do not fit inside a bank’s rules. So, while banks stay inside the box, hard money works outside the box. And because of that, it becomes a powerful tool for investors who want speed, flexibility, and more control over their deals.

The Big Myth: Lower Rate = Lower Cost

Most investors believe that a lower interest rate always means a cheaper loan. However, that is not always true. In fact, sometimes a 12% loan can cost less than an 8.5% loan. At first, that sounds backwards. But once you look at the full picture, it starts to make sense. The truth is, the rate is only one piece of the puzzle. You also need to look at fees, time, and how long you will hold the property. Because of that, focusing only on the rate can actually cost you money.

Real Deal Example (Simple and Clear)

Let’s walk through a real example so you can see how this works. In this deal, the purchase price is $450,000, and the rehab is $50,000. The after repair value is about $700,000. The lender will fund 90% of the purchase and 100% of the rehab. Now, there are three loan options to choose from. The first option is a hard money loan at 12% with one point and almost no extra fees. The second option comes in at 9.75% with higher points and added fees like draws and inspections. The third option has an 8.5% rate but includes even more fees and processing costs. At first glance, the lower rate looks better. However, we need to look deeper.

Now Let’s Look at Time (This Changes Everything)

Time is the key factor that changes everything. First, if the project takes about three months, the 12% loan actually comes out cheaper by about $2,600 to $4,000. This happens because you avoid many of the upfront fees and extra costs tied to the lower rate loans. Next, if the deal stretches to six months, all three options come very close in total cost. This is the break-even point where rate and fees balance out. However, if the deal goes longer, such as nine to twelve months, the lower rate loan becomes the better option. This happens because interest has more time to build, and over time, the lower rate saves more money.

The Simple Rule (Easy to Remember)

So, here is the simple rule you can remember. If the deal is short, a higher rate loan can often cost less. On the other hand, if the deal is long, a lower rate loan will usually win. Because of that, you always want to match your loan to your timeline. This one shift in thinking can save you thousands of dollars on every deal.

Why This Happens (Plain English)

Now let’s break down why this happens in simple terms. First, points are just prepaid interest. So, when you pay points, you are paying part of the interest upfront instead of over time. Next, fees like draw fees, inspection fees, and processing costs can add up quickly. Even though they may seem small, they slowly eat away at your profit. Finally, time multiplies everything. The longer you hold a deal, the more interest you pay, and the more those costs grow. Because of that, time plays a bigger role than most investors think.

A Quick Example You Can Feel

Let’s make this real. Imagine you expect to make $40,000 on a deal. Now, each extra month you hold that property costs you about $4,000. So, if your project runs three months longer than planned, you lose $12,000. That is a big hit. And in many cases, those delays happen because the funding was not set up correctly from the start. Because of that, having the right loan and enough funds ready can protect your profits.

Why Hard Money Can Be the Best Choice

Even though hard money often has a higher rate, it can still be the best choice for many deals. First, it allows you to move faster, which helps you finish projects sooner. Next, it reduces delays, which keeps your costs down. In addition, it often has fewer hidden fees, which means more money stays in your pocket. Finally, it allows you to complete more deals each year. And when you do more deals, your total profit grows.

Protect Your Profits with Better Funding

You may have heard this before: you make your money when you buy, but you protect it with your funding. What this really means is that you need to choose the right loan for each deal. You also need to match your loan to your timeline. In addition, you should always look at the total cost, not just the rate. Because every deal is different, your funding should be different too. When you take the time to do this right, you keep more of your hard-earned profit.

The Smart Move: Run the Numbers First

Before you move forward with any deal, take the time to run the numbers. First, compare at least two or three lenders. Next, look at the full picture, including rate, fees, and time. Then, test different timelines to see how the cost changes. When you do this, you can clearly see which loan is best for your situation. This is exactly why tools like a loan optimizer are so valuable. They help you make smart decisions based on real numbers, not guesses.

Final Thought

So, yes, a higher interest rate can actually cost you less. However, this only works when the deal moves fast. That is why smart investors do not chase the lowest rate. Instead, they focus on the best loan for the deal in front of them. Because when you choose the right funding, you do more than save money. You protect your profits and set yourself up for long-term success.

Watch our most recent video to find out more about: Why a 12% Hard Money Loan Can Cost You LESS Than 8.5%

Hard Money: The Out-of-the-Box Loan Real Estate Investors Need

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Real estate investing is full of deals that don’t fit the normal rules. However, that’s often where the best opportunities are found. That’s why understanding Hard Money: The Out-of-the-Box Loan Real Estate Investors Need can change how you look at funding. Instead of getting stuck when a deal doesn’t fit the bank’s box, you can move forward with speed, flexibility, and confidence.

What Is Hard Money?

When real estate investors talk about hard money, they are talking about out-of-the-box lending. So, what does that really mean? Most loans today come from big lenders. However, those lenders work inside a tight box. They want perfect deals, clean properties, strong credit, and clear history. But here’s the problem—not every great deal fits in that box. That’s where hard money comes in, and because of that, investors can move forward when others get stuck.

“In-the-Box” vs “Out-of-the-Box” Lending

In-the-Box Lending (Traditional Loans)

Most lenders want a simple and safe deal. For example, they prefer a single-family home, sometimes up to 3–4 units. In addition, they want a credit score over 700, past experience, and money into the deal. Also, they look for strong comparable sales nearby. So, in short, they want everything to fit neatly into their system.

Out-of-the-Box Lending (Hard Money)

On the other hand, hard money looks at deals in a different way. Instead of asking, “Does this fit our rules?” they ask, “Does this deal make sense?” Because of that, hard money can fund deals that others won’t, and that is why it plays such a key role for investors.

Why Investors Need Hard Money

Real estate is not always clean and easy. In fact, many of the best deals are messy, unusual, or time-sensitive. So, if you only rely on traditional loans, you will miss out. However, when you use hard money, you gain speed, flexibility, and opportunity. More importantly, you gain control over your deals, which helps you move faster and make better decisions.

Real Examples of Out-of-the-Box Deals

Let’s make this simple. Here are a few real-world examples that show how hard money works.

Example 1: Quick Flip (2–4 Weeks)

Sometimes, you find a deal you don’t want to fully rehab. Instead, you clean it up, list it fast, and sell it quickly. Traditional lenders usually won’t touch this type of deal. However, hard money can step in, and because of that, you can move quickly and lock in profits.

Example 2: Double Closing (Wholesale with Ownership)

In some deals, you buy the property first and then sell it to another buyer. This is called a double closing. Now, many lenders won’t allow this structure. But again, hard money can step in and help you complete the deal smoothly.

Example 3: Land Deal

Here’s a simple example. You buy land for $300,000, then you split it into 8 lots, and after that, you sell each one for $75,000 to $100,000. That creates strong profit potential. However, most lenders will say no to this type of deal. Meanwhile, hard money sees the opportunity and focuses on the upside.

Example 4: Small Town Property

Many lenders avoid small towns because there are fewer sales and fewer comparable properties. Because of that, they feel the deal is too risky. However, some of the best deals live in small towns, and hard money works well in these areas. So, instead of missing out, you can move forward with confidence.

Example 5: Finish a Project Loan

Let’s say you are 80% done with a project, but then you run out of money. Now, the project slows down, and as a result, your profit starts to shrink. However, hard money can step in, fund the remaining work, and help you reach the finish line faster.

Example 6: Bridge Loan

Sometimes, you need to buy a new property while selling another one. That’s where a bridge loan helps. It allows you to move forward without waiting, and then once your old property sells, the loan is paid off. Because of that, you keep your deals moving instead of getting stuck.

What Hard Money Really Cares About

This is where things get simple. Hard money is not focused on perfection. Instead, it focuses on the deal, the exit plan, and the opportunity. In other words, does the property have value, can you sell or refinance it, and is there profit and equity? If those three pieces work together, then the deal can work, and that is what really matters.

What Hard Money Does NOT Focus On

Unlike traditional lenders, hard money is more flexible. For example, your credit score matters less, your experience is not always required, and your income is not the main focus. Instead, the deal leads the way. Because of that, even a first-time investor can succeed if they find the right opportunity.

Why This Matters for Your Profits

Here’s the truth most investors miss—the best deals are often the hardest to fund. So, if you only use traditional loans, you move slower, miss deals, and lose profits. However, when you add hard money to your strategy, you move faster, close more deals, and increase your profits. As a result, you create more opportunities over time.

Simple Story to Bring It Together

Think about this like driving across town. If you have full funding, it’s like hitting every green light. On the other hand, if you have some funding, it’s like hitting every other light. And if you don’t have funding, it’s like hitting every red light and sitting in traffic. So, who gets there first? More importantly, who makes more money?

When Should You Use Hard Money?

You should use hard money when the deal does not fit the normal box, when you need speed, when you need flexibility, or when you see a strong profit opportunity. Because at the end of the day, if the deal makes sense, hard money can help you make it happen.

Final Thought

Real estate investing is not about perfect deals. Instead, it is about finding good deals and having the right funding to close them. So, don’t let the “box” limit your success. Because when you think outside the box, that is where the real profits live.

Next Step

If you have a deal that feels a little different, that might be your best deal. So, take a second look, run your numbers, and get a second set of eyes. Because the right funding can turn a “maybe” deal into a real profit.

Watch our most recent video to find out more about: Hard Money: The Out-of-the-Box Loan Real Estate Investors Need

SOS! Stuck in a Fix & Flip—Here’s How to Get Out

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SOS! Stuck in a Fix & Flip—Here’s How to Get Out

Today we are going to discuss SOS! Stuck in a Fix & Flip! Flipping houses can feel exciting—until it doesn’t. Sometimes a property just won’t sell for what you need. Stress builds. Bills pile up. And you start asking, what now?

The good news? You still have options. Let’s look at three ways to pivot and move forward.

1. Update It: Bring the Property Up to Market Standards

Buyers today want move-in ready homes. If your property looks unfinished or dated, they’ll move on to the next one.

Ask yourself:

  • Does the home need a new roof?

  • Are the floors worn out?

  • Could a kitchen or bathroom upgrade seal the deal?

  • Is the yard still bare or messy?

👉 Example: If your flip looks great inside but the landscaping is dirt and weeds, buyers might skip it. Spending a little more to finish the yard could push it to the top of the list.

When the market has plenty of choices, your property needs to shine brighter than the rest.

2. Bridge It: Buy More Time with a Short-Term Loan

Sometimes the problem isn’t the property—it’s the timing.

That’s where a bridge loan comes in. It can carry you from your current fix-and-flip loan into the next selling season. Most bridge loans last one to two years.

Before you bridge, check your burn rate:

  • Monthly loan payments

  • Taxes

  • Insurance

  • Utilities

👉 Example: If your property costs $3,000 a month to hold but you still have $50,000 in potential profit, bridging for six months could make sense—especially if rates drop or the market heats up.

But if your margins are too thin, it may be smarter to sell now, take a small hit, and move on. Sometimes limiting your loss is the best business move.

3. Turn It: From Flip to Rental

If selling isn’t working, consider turning the property into a rental.

Options include:

  • DSCR loan (Debt Service Coverage Ratio loan): Approval is based on rental income, not your personal income.

  • Conventional loan or bank loan: Great if you qualify and want long-term stability.

  • Short-term or mid-term rentals: Could generate strong cash flow depending on the area.

⚠️ Watch your listing price! Lenders often use the lower of the appraisal or listing price. Dropping your list price too low can hurt your refinance options.

👉 Example: One investor kept cutting her list price to $250,000. But when she applied for a DSCR loan, the home appraised at $330,000. Because lenders had to use the lower number, she couldn’t get the funds she needed. Keeping her listing higher would have opened better options.

Turning a flip into a rental might even be the push you need to start building a long-term portfolio. Rentals bring cash flow, tax benefits, and future wealth.

The Bottom Line

Every stuck flip has a solution. The key is to:

  1. Know your numbers.

  2. Check your stress level.

  3. Decide whether to update, bridge, or turn.

Real estate is a business. Sometimes it’s about maximizing profit. Other times it’s about limiting loss and keeping momentum.

Need a Second Set of Eyes?

If you’re stuck, don’t stay frozen. A quick strategy session could help you see your best path forward—whether that’s finishing updates, bridging into the next season, or refinancing into a rental loan.

Let’s clear your mind, clear the deck, and get you moving on to your next deal.

Contact us today to find out more!

Watch our most recent video to learn about: SOS! Stuck in a Fix & Flip—Here’s How to Get Out

Stop Confusing These Loans! Fix and Flip vs Hard Money Explained

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Stop confusing these loans! Fix and flip vs hard money explained! Are you a real estate investor wondering which loan to use? Maybe you’ve heard of fix and flip loans and hard money loans, but you’re not quite sure which one is right for your next deal.

Let’s break it down. These two loans may seem similar, but they are not the same. Understanding the difference can save you time, stress, and thousands of dollars.

What Is a Fix and Flip Loan?

A fix and flip loan comes from big lending companies—usually backed by Wall Street money. These lenders include names like Kiavi, RCN, and Lima One.

They work well if:

  • You have good credit (typically 680+)

  • You have money for down payments and reserves

  • You’re buying a standard single-family home

  • Your deal fits in their box

Here’s What “Their Box” Means:

Fix and flip lenders want:

  • Properties in clean neighborhoods

  • Homes that sell between $250K and $350K

  • Borrowers with 3–5 flips already under their belt

  • A simple exit strategy like resale or refinance

Example:

You find a house worth $100,000 that will be worth $200,000 after repairs.
The lender might offer:

  • 90% of the purchase = $90,000

  • 100% of rehab = $40,000

But—you’ll need to bring the 10% down, plus have extra money set aside for reserves, closing costs, and interest payments.

What Is a Hard Money Loan?

Hard money loans are different. They come from real people or small private lenders. These lenders focus more on the deal than on your credit or experience.

They work great if:

  • Your credit score is lower

  • Your deal is outside the box

  • You don’t have a lot of cash to put in

  • You need flexibility

Hard money lenders look at:

  • Loan-to-value

  • Market strength

  • Exit strategy

  • Your ability to finish the project

Example:

You find a house worth $200,000 after repairs.
You can buy it for $80,000 and fix it up for $20,000.

That’s only 50% of the ARV (After Repair Value).

With a deal this strong, a hard money lender might fund:

  • 100% of the purchase

  • 100% of the rehab

  • Even your closing costs

You walk in with $0 out of pocket because the deal makes sense.

Fix and Flip Lenders vs Hard Money Lenders

Let’s compare side by side:

Feature Fix and Flip Loans Hard Money Loans
Credit Score Needed 680+ Not score-driven
Property Type Standard, 1–4 unit Unique, land, large, or small deals
Experience Required 3–5 previous flips Helpful, but not required
Cash Needed Upfront Down payment + reserves May offer 100% if the deal is strong
Speed and Paperwork Slower, more docs Faster, less paperwork
Who It’s Best For Cookie-cutter flips Unique or off-market opportunities

So, Which Loan Should You Use?

It depends.

➡️ Use a fix and flip loan if your deal is clean, simple, and in a popular area. You’ll likely get a lower rate and lower points—but you must fit their box.

➡️ Use a hard money loan if your deal is messy, different, or small-town. You’ll pay a little more, but the lender will work with you. They care more about the property and less about perfect credit or experience.

Bonus: The Best Loan for BRRRR Investors

If you’re using the BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat), hard money can be a great fit. Why?

Because hard money lenders can fund 100% of the deal if the numbers work and you’re already pre-approved for your refinance loan.

Final Thoughts

Both types of loans can be powerful tools. The key is knowing:

  1. What your deal looks like

  2. How much cash you have

  3. What kind of lender will work with you

👉 Fix and flip loans give you great terms if you fit the mold.
👉 Hard money loans give you flexibility when life—and deals—don’t fit the mold.

Need Help Finding the Right Fit?

At Hard Money Mike, we work with both kinds of lenders. And we have free tools like:

  • ✅ Cash Flow Worksheet

  • ✅ Quick Deal Analyzer

These tools help you know if a deal is worth doing before you borrow a single dollar.

👉 Download them now and take the guesswork out of your next investment.

Stop confusing these loans! Fix and flip vs hard money explained! Watch our most recent video to find out more!

Why Renovation Speed is the Key to Your Success

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Today we are going to discuss why renovation speed is the key to your success. Renovating a property can make or break your success as an investor. The key? Speed. The longer a project takes, the more it costs. However, when you move quickly and efficiently, you keep more money in your pocket and get to the next deal faster. Let’s break down why speed matters and how it can boost your profits.

Time is Money

Every extra day of renovation costs you. Loan interest, utility bills, as well as property taxes keep adding up. The longer your project drags on, the smaller your profits become.

Fast Renovations Mean Faster Profits

Let’s compare two investors:

  • Investor A flips a house in three months and moves on to the next deal.
  • Investor B takes six months, paying twice the holding costs.

Who do you think makes more money? The faster you finish, the faster you profit.

Rentals Need Speed Too

If a rental sits empty, it’s losing money. A one-month delay means missing an entire month of rent. Fast renovations get tenants in sooner, putting cash in your pocket.

Speed Without Sacrificing Quality

Fast doesn’t mean sloppy. It means having a solid plan, hiring the right team, and keeping things on schedule. Delays kill deals, but efficiency builds wealth.

Conclusion

If you want to maximize your real estate success, focus on speed. Whether flipping or renting, a fast, well-planned renovation means lower costs, quicker profits, and more deals in the future. Don’t let delays eat into your success—keep things moving and watch your investments grow!

Contact Us Today! 

Do you have more questions about what makes an investment property a good investment? Contact us today to find out more! 

Free Tools For You! 

We also have free tools available! Download the Quick Deal Analyzer to see if your potential property will be a good investment.

Learn more!

Visit our YouTube channel to learn more about real estate investing and how you can get on the fast track to success! 

Fix & Flip Like a Pro: Hard Money Strategies for Maximum Profits

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Today we are going to discuss how to fix & flip like a pro: hard money strategies for maximum profits. Flipping homes is one of the fastest ways to build wealth in real estate. But without the right funding, your project can stall before it even begins. That’s where hard money loans come in. They offer fast, flexible financing that can cover up to 100% of your deal (in the right conditions).

In this guide, we’ll break down the key numbers, loan terms, as well as roadblocks that can make or break your success. Plus, you’ll get access to a free Excel spreadsheet to help you run your numbers before making a move.

Step 1: Know Your Key Numbers

Lenders evaluate fix and flip deals using three key numbers:

1. Purchase Price

  • This is what you’re paying for the property.
  • Example: $200,000

2. Rehab Budget (Scope of Work)

  • This includes repairs, upgrades, and improvements.
  • Example: $50,000

3. After Repair Value (ARV)

  • This is the projected value after renovations.
  • Example: $350,000

💡 Pro Tip: Your lender will use the ARV to determine how much they can lend. Most lenders offer loans up to 75% of the ARV.

Step 2: Understanding Your Loan Amount

Lenders will calculate your loan based on the ARV, purchase price, and rehab costs.

  1. Maximum Loan Amount (75% of ARV)

    • $350,000 × 75% = $262,500
    • This is the highest loan amount a lender might offer.

  2. How Much You Actually Get

    • Lenders will not give more than the total of your purchase price + rehab.
    • In this example:
      • Purchase + Rehab = $250,000
      • Since $250,000 is less than the $262,500 max loan, you could qualify for full coverage.

✅ Result: If your numbers align, you may be able to secure 100% financing. If not, you’ll need additional funds.

Step 3: What Costs Do You Need to Cover?

Even with hard money financing, you’ll have out-of-pocket costs. Here’s what you should prepare for:

1. Down Payment

  • Lenders typically fund 80–90% of the purchase price.
  • You may need to bring 10–20% of the purchase price in cash.
  • Example: $200,000 purchase price × 20% down = $40,000 out-of-pocket.

2. Rehab Cost Contribution

  • Many lenders fund 80–100% of rehab costs, but you must pay upfront and get reimbursed.
  • Example: $50,000 rehab × 90% lender coverage = $5,000 out-of-pocket.

3. Closing Costs & Loan Fees

  • Loan origination, title fees, and processing costs typically range from 2-4% of the loan.
  • Example: $205,000 loan × 3% closing costs = $6,150.

4. Carry Costs (Holding Expenses)

  • Monthly interest-only payments on the loan.
  • Taxes, insurance, utilities while holding the property.
  • Example: $205,000 loan at 10% interest = $1,700/month.

💡 Pro Tip: Many first-time investors underestimate how much cash they need upfront. Make sure to plan for these costs before diving into a deal.

Step 4: The Biggest Roadblocks & How to Overcome Them

Even great deals can fail if you don’t have the right funding strategy. Here’s what commonly trips up new investors:

❌ Not Having Enough Upfront Capital

✅ Solution: Build your Money Bucket with personal savings, business credit lines, or HELOCs.

❌ Not Understanding Escrow Releases

✅ Solution: Hard money lenders hold rehab funds in escrow and release them in stages. Make sure you can cover materials and labor upfront before reimbursement.

❌ Underestimating Holding Costs

✅ Solution: Budget for at least 4–6 months of carrying costs (interest, taxes, insurance).

💡 Avoid These Issues by Running Your Numbers First!

Step 5: Get Your Deal Funded the Right Way

Hard money loans are powerful tools when used correctly. The key is knowing your numbers, planning ahead, and ensuring you have enough funding to complete the project.

✅ Grab Your FREE Fix & Flip Calculator that is featured in this video that discusses fix & flip like a pro: hard money strategies for maximum profits. 

This tool will help you:
First, Calculate your loan amount
Second, See your cash needed upfront
Finally, Estimate your monthly payments

Got questions about fix and flip loans? Contact us today! Let’s make sure your next flip is your most profitable one yet! 🚀

Need More Funding?

Visit HardMoneyMike.com for more expert advice on real estate loans, BRRRR strategies, as well as funding solutions.

Fix and Flip Investment Properties

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Today we are going to discuss fix and flip investment properties. Are you ready to turn neglected properties into profitable investments? Fix-and-flip projects can be one of the most exciting ways to grow wealth in real estate. The process is simple to understand: find a property with potential, renovate it, and sell it for a profit. But to succeed, you’ll need the right plan and funding to keep everything moving smoothly.

For example, imagine buying a home for $150,000 that just needs some cosmetic updates. After spending $30,000 on repairs like new floors, paint, and landscaping, you sell it for $220,000. That’s a $40,000 profit! However, to make this happen, you’ll need to know how to budget for purchase costs, repairs, and holding expenses.

Timing also matters. The faster you can finish a project, the quicker you can get it sold and move on to the next deal. This means having reliable contractors, staying on top of schedules, and making smart financial decisions—like securing funding upfront to avoid delays.

Fix and flip projects are great for those who enjoy creative problem-solving and hands-on work. If you’re organized and ready to take action, these investments can offer fast returns.

Stay tuned as we dive deeper into what it takes to succeed in fix-and-flip investing, from finding properties to picking the right financing options. With the right strategy, you can turn run-down properties into opportunities.

Contact Us Today! 

Are Fix and Flip investment properties right for you? Contact us today to find out more! 

Free Tools For You! 

We also have free tools available! Download the Quick Deal Analyzer to see if your potential property will be a good investment.

Learn more!

Visit our YouTube channel to learn more about real estate investing and how you can get on the fast track to success! 

How to Sell Your Fix and Flips Faster in 2025

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Today we are going to review how to sell your fix and flips faster in 2025. Selling a fix-and-flip property quickly can mean the difference between a good profit and unnecessary losses. With rising interest rates, it’s more important than ever to make your property attractive and affordable to buyers. Here are practical steps to sell your fix-and-flips faster while maximizing your profits.

Why Affordability Matters More Than Ever

In 2025, most buyers focus on payments, not just price. Whether it’s a car, a boat, or a house, people think in terms of what fits their budget—and what they can qualify for. For a property to sell quickly, you need to control the buyer’s monthly payment. That means focusing on two key numbers:

  1. The purchase price
  2. The interest rate

Instead of dropping your price, consider strategies to lower the interest rate for your buyers. This expands the pool of people who can afford your property, creating more competition and selling your property faster.

Example: $400,000 Property in a High-Interest Market

Let’s say you’re selling a property for $400,000. Current market interest rates are 6.875%, and your target is to keep the monthly principal and interest payment under $2,000. Here’s how the numbers play out:

  • At 6.875%, the payment for an 80% loan (with 20% down) would be $2,100.
  • To attract more buyers, you need to lower the payment below $2,000. This could double or triple the number of potential buyers who qualify.

You have two main options to achieve this:

Option 1: Drop the Purchase Price

A common strategy is to reduce the property price. Here’s what that looks like:

  • A 5% price drop from $400,000 brings the price down to $380,000.
  • At 6.875%, the payment drops to $1,997.

This method works, but it costs you $20,000. If your profit margin was 10%, you just lost 50% of your profits. For a 15% margin, you lose a third of your profits. That’s a significant hit just to open up the buyer pool.

Option 2: Buy Down the Interest Rate

Instead of reducing the price, focus on lowering the buyer’s interest rate. Here’s how:

  • Keep the purchase price at $400,000.
  • Offer to buy down the buyer’s interest rate by 1.5 points.
  • The cost of the rate buy-down is based on the loan amount, not the purchase price. For an 80% loan of $320,000, 1.5 points would cost $4,800.

This strategy lowers the payment to $1,996, the same as the price drop, but it costs only $4,800 instead of $20,000. By focusing on payments rather than price, you keep more money in your pocket while still attracting more buyers.

How to Market This Strategy

When advertising your property, emphasize lower monthly payments, not the buy-down itself. Many buyers and even Realtors don’t fully understand rate buy-downs, but everyone understands affordability. Use phrases like:

  • “Affordable monthly payments”
  • “Lower payment options available”
  • “Permanent payment savings”

Highlighting the payment advantage makes your property stand out in a competitive market.

Key Takeaways for 2025 Fix-and-Flips

  1. Buyers focus on payments, not just price.
  2. Lowering the interest rate is often more cost-effective than dropping the price.
  3. Market your property by emphasizing affordability and payment savings.

At Hard Money Mike, we’re here to help you succeed with your fix-and-flips. Whether you need financing for your next project or strategies to sell faster, we’ve got you covered. Reach out to us for the best tools, rates, and terms to make your projects a success.

Watch our most recent video to find out more about: How to Sell Your Fix and Flips Faster in 2025

5 Ways to Flip Properties During a Recession

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Real estate investing can still be your career. Here are 5 tips to flip properties during a recession.

With prices going down, can you really make money on flips during a recession?

Some investors dabble in fix-and-flips while times are good in real estate. But there are other people who use real estate investing as their career, and they’re going to flip no matter what. How can those investors continue to be successful as money tightens up?

This is the third recession we’ve been through at Hard Money Mike. Here are 5 strategies we know work for flips during hard times.

1. Buy on the Lower End

What’s the medium price point in your community right now? Stick to that number and below. 

Interest rates will force any current buyers into a much lower budget. Payments on cheaper properties will still be close to (or cheaper than) rent, even if rates go up to 8 percent.

Affordability puts more buyers at a lower price point as a recession goes on. So you’ll make more money in the long run with lower priced homes.

2. Only Buy Properties That Cash Flow

We don’t know what’s going to happen in the market. But we do know two patterns from past recessions: 

  1. Homeownership will go down.
  2. Rent prices will go up.

If you’re flipping, you need to know the worst case scenario. Worst case for you is the house won’t sell, and you’ll need to convert it to a rental. You may have to keep this property for 6, 12, or 18 months before it will sell.

In the event you can’t sell when you need to, it’s important to make sure the property cash flows. Or at the very least, that you have the ability to refinance.

Another tip to keep in mind: if you may have to refinance and rent your property… don’t drop the price!

The appraiser values your home based on your last marking listing price. Every time you drop a property’s price, it drops loan availability and LTVs.

3. Start Cutting Your ARVs By 10-20%

This one’s hard for a lot of people who do flips. But to flip properties during a recession, this is a necessary step.

Interest rates are anticipated to rise from 7% this year to 8% next year. When interest rates rise 1 percent, consumers’ purchase power goes down 7-10 percent.

Say you had someone who could qualify for a $200,000 loan at a 7% interest rate. Then the rates go up to 8%. That same person would only be able to qualify for around $180,000.

You have to understand: as interest rates go up, prices go down and payments go up. And people buy based on payment.

To set yourself up for profit, take into account the upcoming increase in interest rates, and cut your ARV.

4. Look at a LOT of Deals, Buy Very Few

Most people who aren’t full-time fix-and-flip professionals have gotten out of the business. They won’t be back for at least another year or two. 

Because of that, sellers will have more deals. Wholesalers have more available right now. There are also more real estate agents specializing in REI, so they’ll have deals, too.

With more deals available, it’s a great time to buy.

However, there will also be fewer buyers. So while it’s a good time to buy, be careful not to get stuck with a bad property and no buyers.

Look for properties that meet these criteria: 

  • In good areas
  • At a lower price point
  • Cash flow

Put in a lot of time to research properties. Jump on the best ones, and let the others go.

5. Quality matters

If you flip properties during a recession, focus on quality.

We had a client recently who learned this lesson. They were looking for a buyer that could have afforded a $800,000 house in January of 2022. Then interest rates skyrocketed. Come October of the same year, that same buyer could only afford $575,000.

Imagine the expectations of someone who was recently going to buy an $800,000 house and now can only afford $575k. They need to walk in and see a glimpse of the $800k quality.

At the very least, these potential buyers can’t walk in and think, “We’d have to start over.” If they feel they need to “start over,” they’re going to leave and find a better house.

Remember, there will be a lot of homes on the market – buyers have more options than just you. You can’t skip renovations and expect to sell fast or get the best price. Make sure you do quality work when you buy flip properties during a recession.

Getting a Loan to Flip Properties During a Recession

If you find a deal you want reviewed, send it our way! We’re still lending, and we’d be happy to help you fund a deal. 

Email us at Mike@HardMoneyMike.com with deal information or questions.

Happy Investing.