Tag Archive for: #hard money lender

Secure 100% Financing for Your BRRRR Investment

Secure 100% Financing for Your BRRRR Investment

Today we are going to discuss how to finance a BRRRR at 100%.  That means no money out of your pocket for the purchase, rehab, closing or even carry. For the past 14 years we have been helping people get 100% financing for BRRRR. It all comes down to one thing, making sure that the people are purchasing good properties at 75% or less. How can you secure 100% financing for your next BRRRR investment? Let’s take a closer look!

How can you achieve success in this current market?

There are a lot of opportunities for real estate investors right now. Just the other day we had a client who had bought a property in the Denver market for $300K. After putting in $50K in rehab, the property was worth $550K in the end. There are many other real estate investors who have been successful in similar situations in spite of the challenging market. How do they achieve such success? The answer is getting the correct upfront loan. While predictions indicate that there will be more opportunities in 2024 and 2025, now is the time to invest. Now is the time to jump in.

Selecting the right loan for you.

Remember that conforming conventional loans have restrictions that prevent investors from refinancing properties within the first year. However, a rate and term loan, such as a DSCR or conventional loan, allows investors to refinance immediately after getting an appraisal. By having a great hard money lender for your purchase, you will be able to refinance and get cash out of the property quickly and easily.

Find the right hard money lender.

It is crucial that real estate investors work with a hard money lender who can get up to 75%. Just to clarify, the 75% is based on the amount that you can refinance. Here at Hard Money Mike we say 75% because most clients can refinance into a conforming or DSCR at 75%. However, if you’re only able to finance up to 70%, then we will have to match whatever you qualify for on the long term or take out loan. It is important to remember that a BRRRR includes a buy, which is the first loan, and then there is a refinance. The refinance dictates how much a lender on the buy can give you. By finding the right hard money lender you will be on the path to success.

Let’s look at some numbers on the buy side.

The first calculation that needs to be done prior to purchasing a property is determining the maximum loan amount. This can be found by multiplying the ARV by 75% or .75. Once the max loan value is determined, real estate investors can then calculate if the property will be able to qualify for 100% BRRRR financing. 

Calculating Max loan amount.

Purchase price: $120K

ARV: $200K

Max loan: $200K x .75 = $150K 

Will it qualify for 100% financing?

Purchase price: $120K

Rehab: $20K

Closing costs + Carry costs: $10K

It is important to remember that closing costs are not only on the buy, but they are on the refinance as well. Also, carry costs should be added to the total in order to cover a few months of monthly payments, taxes, and insurance on the property until it can be rented. In most cases, investors are able to get the property rented before refinancing, which will in turn lower the carry costs. By keeping the purchase price, rehab costs, closing costs, and carry costs all under the maximum loan amount, real estate investors can finance a BRRRR at 100%. 

Finance a BRRRR at 100% today!

In order to finance a BRRRR at 100%, you need to make sure that all of your costs are less than the max loan amount. It is important to have a hard money lender who understands BRRRR’s. Here at Hard Money Mike we can help you run through numbers to make sure that you are in line to get 100% BRRRR financing. 

Watch our most recent video to find out more about how you can Secure 100% Financing for Your BRRRR Investment.

70% ARV: The Hard Money Trick That Could Cost You

When a hard money lender tells you they’ll give you 70% ARV, what does that really mean?

Hard money lenders often say they lend up to 70% or 75% of the after-repair value (ARV) of a property.

Did you know that’s often misleading?

When private lenders (big hard money lenders backed by Wall Street funds) say they lend up to 70% of the ARV, there’s a slight trick that some borrowers miss.

Let’s go over the differences that “70% ARV” might mean for different lenders, so you can maximize your LTV.

The Full Cost of Your Flip

One thing to remember when you’re looking at fixed and flip loans: there are a lot of other costs besides the down payment. You’ll also have closing costs, points, interest, insurance, and other expenses not included in the amount most lenders give you.

We want to make sure we minimize how much comes out of your pocket so you can do more deals or at least get to that first deal.

The 70% Myth

Typically, most lenders in this market will lend you up to 70% of the after-repair value. This ARV is what you’ll be able to sell a property for (not buy it for). It’s how much it should be worth after it’s fixed up.

But here’s the caveat big hedge fund hard money lenders have:

That total 70% of the ARV is split between the purchase price and rehab. And typically, they’ll do 100% of rehab costs but limit the purchase price to 85%.

And this is for their best clients. You’ll see these LTVs cut, depending on your quality, the size of your market, and the location of your property. Smaller markets can go down to 80/90 for purchase price/rehab. Rural properties could go down to 65% overall – if they’ll even lend to you at all.

So the 70% is only for the best properties in the best areas. Let’s dive in and find out exactly how they don’t get to that 70% that they promise you.

Example of the 70% ARV Myth

Let’s look at a property that has an ARV of $200,000. This is what you think you’re going to sell it for, based on the comps.

If our hard money lender is going to give us 70% of it, that’s $140,000 max.

This works for most deals. As long as you follow these budgeting guidelines:

  • Real estate agent: 5%
  • Lender fees: 8%
  • Closing costs: 2%
  • Profit: 15%

Now, let’s say you’re purchasing a property for $120,000 and you’re going to put $20,000 into rehab. This gets you right to the $140k your lender will give you.

But now we got to remember one thing:

Best case, they’re only going to lend you 85% of the purchase price. In this case, that’s only $102,000. (They’ll still cover 100% of the rehab in escrow). 

This leaves $18,000 you’ll be paying for out-of-pocket. Plus, many of these lenders require 6 months’ worth of reserves (we’ve even given short-term loans to investors just so they had enough reserves to get a loan from one of these other larger hard money lenders).

Hard Money Lenders With a True 70% ARV

A smaller, local hard money lender like Hard Money Mike has a different approach to LTVs. Let’s walk through this example with the same $200,000 ARV property.

When we lend 70% of the ARV, that’s a true $140,000 for the right client and deal. This means the purchase is fully funded – plus you get the $20,000 in escrow for rehab costs.

Finding the Right Hard Money Loans

The offer from the bigger lenders will be right for some people. But if you want to maximize your leverage, small hard money lenders like Hard Money Mike give you an alternative.

Want to see if we have the right loans for your project? Reach out to us at Info@HardMoneyMike.com.

Happy Investing.

Why You Need Hard Money in 2023

Institutional lenders aren’t cutting it this year. Here’s why you need hard money.

When the Fed raises rates and big institutions like banks and hedge funds tighten money… Where is the real estate investor supposed to go to get funds?

2023 is a great time of uncertainty. Uncertain times can be the hardest and most expensive – but best! – for buying.

One solution for real estate investors: hard money.

It’s a simple truth. In 2023, you need hard money. Let’s explain why.

You Need Reliability

True hard money is from real people. They need the interest they get from these loans whether times are good or bad, so hard money loans are less likely to change with volatile markets.

These lenders don’t run when they see inflation, and their interest rates won’t fluctuate nearly as much as institutional rates.

In fact, banks’ interest rates are getting closer and closer to hard money rates. In the Colorado market, many banks are only charging 1 point less than hard money lenders.

You Need Hard Money’s LTVs

A huge issue with bank and institutional lending right now is the amount they’ll lend.

We’ve had a recent client share their experience with a big private lender. While they used to lend 90-100% of the purchase price of a property, they’re now offering 49% for comparable real estate in metro areas for certain borrowers. In smaller communities, they’re down to 60% LTVs. 

Banks must do this, not just to mitigate risk, but also to attempt to keep their prices low. Hard money is not this way. Hard money rates and terms are the same in good markets and in inflationary ones. The hard money you get in 2023 is the same hard money you got in 2020.

You Need Flexibility

You need a lender who will not only be able to move with the markets but also work with your specific deal.

Maybe you need a second lien, a unique land loan, a bridge loan to buy your next project, or a bridge to cover the costs of a house that’s been stuck on the market for too long.

Big lenders and banks don’t provide those types of loans. And with the market that 2023 is bringing us, you’ll need all the flexibility you can get with your lender.

You Need an Investor-Friendly Lender

Many smaller banks and credit unions aren’t even open to lending to real estate investors. For your career, you need a lender who will work with people who have real estate businesses.

Larger institutions, however, have raised their credit score requirements so high, it boxes many investors out. Banks have raised their minimum credit score by at least 40 points. They used to take people with as low as a 620; now, it’s 640 minimum.

The problem is, some real estate investors don’t have great credit scores due to high credit usage on the lines of credit they use for flips. Hard money is the answer here, since it doesn’t keep strict score requirements.

Getting Hard Money in 2023

Other types of lenders have raised their rates, increased their costs, and lowered the amount they’ll give you in 2023.

If you need the same amount, for the same price, try hard money loans. Hard money doesn’t scrutinize you as a borrower and make decisions based on the Fed. It bases your loans on your property and your deal instead.

Not all lenders – of any type – will give you the same loan. That’s why we want you to use this free deal analyzer. You can enter information for three hard money lenders (or a hard money lender, a private lender, and a bank) to find out which option will truly save you the most cost.

Any other questions about hard money? Reach out at any time to Info@HardMoneyMike.com

Happy Investing.

3 Reasons Why You Need Hard Money for Your Investments

Not sure about hard money loans? Here’s why you need hard money as a real estate investor.

MYTH: hard money always costs more than bank financing.

Over the last year with the fed raising rates, banks’ interest rates have come within 1% of where hard money is. Also, there are advantages hard money has that other financing doesn’t that can end up saving you money overall…

Here are the top 3 reasons why you probably need true hard money for your real estate investments.

1. Flexibility

Every other type of loan – from banks, credit unions, or big private money institutions – only comes within a very strict box. But not hard money.

Hard money is based on one main criterion: the real estate itself. As long as there’s a good property to back you up, hard money lenders will work with you under many circumstances.

Why You Need Hard Money: Splitting Land Example

For example, we helped our client Sam with a deal. He bought a small commercial property with some land next to it. He plans to split the land, divide it into lots, and sell the lots.

When he does sell the individual lots, he’ll begin paying off the hard money loan. We’re working with him to recast the loan as he pays the lots off.

Hard money has this flexibility, while Sam may not be able to get this project done with traditional lenders.

Why You Need Hard Money: Buying Assets for Your Business Example

As another unexpected example, we helped another client who was buying a dump truck for their concrete business. They needed $200,000 to buy the trucks at auction, then they’d be ready to pay it back in a couple of months with the new revenue the truck would generate.

However, they didn’t have $200k in cash available. What they did have was a piece of real estate, so we were able to put a lien on it and help them with the loan.

It doesn’t matter if it’s a first lien, or second, or even third. As long as the deal makes sense, a true hard money lender will look at it.

Why You Need Hard Money: LTVs

The best case scenario with the loan-to-value from other lenders will be 90% of the purchase price and 100% of the rehab.

True hard money, on the other hand, will always use the ARV on a fix-and-flip style property. Most hard money lenders will do 75% of the after-repair value, plus rehab costs.

We have flexibility because we look at the property and the exit strategy, and we take deals based on the likelihood of you and us both being successful.

True hard money is what you need when you need flexibility.

2. YOUR Requirements

Other lenders have a long list of requirements for you. Such as:

  • Good credit score
  • Past experience in real estate
  • A certain amount of reserve money

The beauty of true hard money is it’s based mostly on the property.

Hard Money & Credit

We don’t care whether you have a 600 or 620 score. Your credit score will not determine your loan-to-value, rate, or fees. All those factors are more based on the property.

Yes, we will look at your credit. We want to make sure you’ll pay us back, but we also know that, in this industry, a lot of credit scores are downgraded just because of usage.

Many real estate investors use their credit cards for projects, driving down their credit scores. We understand that’s how you have to run your business. We don’t believe it’s fair to judge whether we should lend to you based on high credit usage. 

Hard Money & Experience

Most lenders require you to have three to five complete transactions over two years in order to give you the highest loan-to-value.

With us, it really depends on the deal. We’ve now done three loans for an investor who came to us with zero investment properties under her belt.

The deal was so good: she could buy the property, rehab it, and still be under 70% ARV. We knew she’d have plenty to pay off the loan whether she sold it as a flip or refinanced it into a $200+ cash-flowing rental.

If you don’t have experience but do have a great deal, then hard money is your option.

Hard Money & Reserves

Big investment firms that do private lending and banks always require more money upfront, in both down payments and reserves.

We recently helped a client in Texas where the only thing stopping the private money lender from lending to them was the reserves. They were just two months shy of meeting the requirements. 

But we don’t really look at reserves. Once again, we’re looking at the property. Do you have the funds to finish the property? Is the property such a good deal your reserves don’t matter? That’s what we’re going to look at. 

3. Speed

The third reason you need hard money is speed. 

With hard money, you can close…

  • Without an appraisal
  • In days instead of weeks
  • On unique properties that would otherwise need extensive underwriting

Why You Need Hard Money to Close Fast

We had a client looking at a $330,000 property. He bid just $300k, and there were 6 other bidders. But, he offered to close within 10 days. The seller took his offer because of that.

In his case (and for many of our clients), the savings they get from closing fast more than cover any additional cost they spend in interest or fees for the hard money loan. Essentially, this client got his property with free money.

Why You Need Hard Money: Finding the Best Hard Money Loan

Flexibility, more relaxed requirements, and speed. This is why you need hard money for your real estate investing career.

But as with all lenders, it’s important to shop around for the cheapest deal on rates and fees. To help with this, download our free loan cost optimizer here. It’ll help you find out which loan is truly the cheapest for you.

Have more questions about hard money? You can reach us at Info@HardMoneyMike.com, or check out the resources on our YouTube channel.

Happy Investing.

Hard Money Lender vs Bank Financing: Why You Need Both

Which funding should you get? 3 case studies on a hard money lender vs bank.

In the typical real estate career, you follow this funding path:

  1. You use hard money because it’s all you can qualify for.
  2. With experience, you start qualifying for bank loans, so you move on from hard money.

What most people miss is a crucial third step:

  1. Now you have two valuable funding sources in your toolkit.

Most people view hard money as a stepping stone to “better” financing. While true in some ways, putting hard money in the past can make you miss out on some amazing opportunities hard money offers.

Let’s get over 3 examples of clients we’ve had who are far into their real estate career but still benefit from hard money. And lastly, we’ll go over how you can make that big step into bank financing.

3 Case Studies – When to Use a Hard Money Lender Instead of a Bank

We work with people who have been doing the investing game for 10 to 15 years… who still utilize hard money whenever they need it. Here’s what three of those people do and how they use hard money vs bank loans.

Mary: Cross Collateralizing with a Hard Money Lender

Mary is a developer who builds big homes here in Denver – anywhere between $2-4 million.

She has bank financing set up for the majority of the construction period. However, when she finds a lot or house she wants to scrape, it usually needs to close within 7-10 days. Her bank funding can’t work that fast.

So, she comes to a hard money lender to get the property quickly and with 100% financing. She cross-collateralizes (aka, uses her other properties) to make sure she gets full funding with us.

Once the property is approved through zoning and everything, her bank funding kicks in to pay off the hard money loan.

Jeff: Hard Money Lender a Solution to a Bank Limit

Jeff is a flipper who does about 4 or 5 projects per year here in town. They’re pretty good sized, ranging from $400k to $800k.

But his bank sets a limit, and he’s only able to do about two flips at a time with them. So when he has two projects going but finds a great deal, he’ll go to a hard money lender. Hard money frees him up to jump on a good property, even when his financing is tied up elsewhere.

TC: Hard Money Lender Is Faster Than a Bank

TC has been a longtime client of ours who also uses other financing too. He came across a deal where he was one of five bidders. On the very first day, he bid $30,000 less than everyone else because that’s what would fit his budget with construction and everything.

And he won the deal. Why?

Because he could also close in less than 10 days with a hard money loan. He didn’t need an appraisal, inspection, or anything else that prolongs the sale and gives sellers a headache.

Using a hard money lender instead of a bank was the only way he was able to get that property for 10% less.

You Need Both!

It’s not either hard money or bank loans. You need to use both.

At the end of the day, bank loans are almost guaranteed to be cheaper with interest rate and points. They should always be used when possible. But sometimes bank loans aren’t realistic – you need money now, or you lose out on a great deal.


  • Cheaper, lower interest rates and fees
  • You get the entire loan upfront
  • Require a good credit score
  • Take longer upfront (closings can take 2-6 weeks or more)
  • Necessary for long projects

Hard money lenders:

  • More expensive, higher interest rates and points
  • Can take longer in the middle of the project to get funds from escrow
  • Lenient on credit
  • Fast closings (sometimes within days)
  • Flexibility
  • Great for short-term projects

Hard money lender vs bank? They both need to be valid funding options in your career.

How to Get Bank Loans for Real Estate Investing

It may be important to keep hard money in your back pocket, but you should always be moving toward acquiring bank loans. This cheap, long-term funding will fuel the majority of your career.

Here are the steps you need to take to make the leap from hard money to bank funding.

1. Be In Business for 2 Years

You need at least one of the following for bank loans:

  • A W-2 job that meets the income requirements (aka, investing is a side gig for you and you make plenty of money elsewhere).
  • Your business has been established for 2 years or longer.

If real estate investing is your full-time job, then you need to show that you have experience and income from it. In that 2-year span, you will want to complete at least 3 successful projects.

2. Have a Good Credit Score

Bank loans are highly credit score-driven. You’ll need a score of at least 680, but higher if you want better terms. This is something you should be working on now so it’s ready when you really need it.

If you struggle with your score because of credit usage from your business, check out this article for a solution.

3. Down Payment Funds

This can be a major obstacle for newer investors. Luckily, you have a lot of options for help with the (usually 20%) down payment for bank loans:

Find Investor-Friendly Banks

One last tip on the journey from hard money to bank loans: find the banks that like to work with real estate investors.

Most of the large banks, like Chase and Wells Fargo, will only work with a very, very select few investors. Instead, you should look at local banks and credit unions that offer investor loans.

Don’t bother barking up the wrong tree. Find a lender who wants to help real estate investors. As you move through your career and get your experience, start reaching out to find the banks in your area that love to work with investors. 

Need a Hard Money Lender vs a Bank?

Need a quick close, gap loan, bridge loan, or a fix and flip loan? Reach out at Info@HardMoneyMike.com

We can help you find unique funding that’s outside of the banking box.

Happy Investing.

7 Ways to Get the Best Rate on a Hard Money Loan In This Market

Interest rates can make or break your REI project. Here’s how to get the best rate on a hard money loan.

Investing is a leverage game.

You need other people’s money to make money – but that doesn’t mean you have to overpay for that money. 

Let’s take a look at how to get the best rate on hard money loans in the current environment.

What Is Hard Money?

Hard money is sometimes called asset-based lending, or private money.

Hard money is a form of leverage focused on the property. All lenders have criteria they require from borrowers. For hard money lenders, the main lending requirement is about the property and project itself.

Lender Niches Will Affect Your Rates

Investors have their own niches, their own likes and wants for their investment experience. Maybe someone doesn’t want rural properties, someone else focuses only on high-end houses, another on low price points.

Lenders have individual likes and dislikes the same way. Every lender draws a box of what they like to lend for. The more your property fits in their box, the better rate they’ll give you.

This means that not all lenders will want your particular project – or that they won’t give you the best rate on your hard money loan. It’s not personal. Not every project will fit in every lender’s “box.”

If you want the best rate, then you’ll have to find the lender that likes your project, your experience, and your property.

Types of Private Money

There are three types of lenders that make up the private lending world: local, national, and OPM.

  • Local Lenders: Lend regionally, in your state or city only.
  • National Lenders: Backed by Wall Street hedge funds. They lend all throughout the US.
  • Real OPM: Other People’s Money. A private loan from someone you know..

The best rate on a hard money loan will vary lender to lender, depending on the type of institution and their preferences. One lender might do land loans, but another won’t. One may offer great rates on new builds but not even offer scrapes.

Whatever your project, it’s important to find a lender that matches you. The closer you match a lender’s preferences, the better your rate.

Despite all these differences between lenders, there are some general rules between the three types of hard money.

Real OPM

The best possible rates come from OPM. A friend, family member, or other investor who wants a safe place to put their money will cost you a lot less than a formal lending institution.

You save on cost with an OPM loan because there are no points, fees, or appraisals. Every institution will charge you these extra on your loan.

OPM also saves you the most on interest rate. The interest rate criteria for most OPM lenders is, “more than they could get in an IRA.” Typically with OPM, interest rates are 3-4% less than other lenders.

National and Local Hard Money Lenders

Both local and national lenders will have similar pricing, for the most part.

Rates for these lenders depend on what they’re looking for in their portfolio. Now, in late 2022 to 2023, most lenders’ rates will be between 9-12%.

One difference, however, is that local lenders tend to not have extra underwriting and appraisal fees.

Shopping Around to Get the Best Rate on a Hard Money Loan

The best rates aren’t going to come to you. You’ll have to shop around to find the best lender for each of your projects.

Talk with lenders in your area and get estimates for loan costs. Then, you can use our free Loan Optimizer tool to quickly compare lenders and find out who’s cheapest.

Lowering Risk to Get the Best Rate on a Hard Money Loan

To get the best rate on a hard money loan, think of it from the lender’s perspective. They want to lend to people who are low risk. Therefore, the less risk you pose, the better your rates become.

So how do you lower the risk? Here are 7 ways you can lower your risk to get a better rate from a lender.

1. Straight Talk

Firstly, be able to back up everything you tell your lender. No lender wants to be in a position where they have to try and figure out what’s true and what’s not.

If you do this, lenders will put you at the end of their long line of waiting borrowers – or they’ll increase your cost.

Give them all the information they need. Be honest about everything – even the ugly parts of your credit or investment history. If you think your rate will be worse if they knew the full store, just remember… It’ll be even worse if they find out you hid it.

2. LTV

The lower the loan amount on a property, the less risk for the lender. The less risk for the lender, the more likely they’re going to give you a better rate.

Putting more money down results in a lower rate overall.

3. Experience

If you can show a lender that you’ve had success flipping houses, building homes, or developing land, you pose less risk. Investors with projects under their belt usually see lower interest rates.

4. Credit

National lenders (hedge funds) use credit as one of their main criteria for rates. The better your credit, the better the interest rate they can offer you.

The difference between a 640 score and a 740 could be a difference of 1-1.5% on your interest rate.

Local lenders and OPM lenders don’t consider your credit score as a major requirement. They will look at your credit, but only to make sure you’re not defaulting or have a foreclosure or bankruptcy.

5. Property & Project Types

As mentioned before, each lender has a real estate niche. If your project fits in their box, you can catch a bit of a break on the interest rate. If it does not fit in their box, they may still lend to you, but they can charge you a little more, making your project less profitable.

6. Loan Size

Some lenders won’t lend under a certain amount.

Hedge funds often dislike smaller loans. Some won’t lend under $100,000 – some have a threshold at $500,000.

Smaller loans, like $25k or $50k, are more suitable for OPM. OPM lenders often have smaller available reserves to lend.

7. Location

Local lenders tend to have a specific region of service. National lenders tend to only loan in metropolitan areas. And OPM lenders tend to be more flexible.

But again, each individual lender will have their own preferences. To get the best rate on a hard money loan, find out the lender whose box you best fit in.

The Truth About How to Get the Best Rate on a Hard Money Loan

If you want the best interest rate on a private loan, you really need to shop around.

There’s money in the money, and the less you have to pay for leverage, the more successful your real estate investing career becomes. Hard money is a powerful investing tool, but the wrong interest rate can destroy your project.

You can download our Loan Optimizer here. Send us an email at Info@HardMoneyMike.com if you have any other questions about how to find the right hard money loan. And check out our YouTube channel for more free real estate investing information.

Happy Investing.

How to Calculate Your Hard Money Loan Amount

What does your lender take into consideration to calculate your hard money loan? Here’s what you need to know.

How much could you get in a hard money loan?

At least 50% of your success as a real estate investor will come from using and understanding leverage well. Simply knowing your numbers gets you ahead of the curve.

You need to be able to figure out a ballpark number of what a lender will give you for your property. Let’s go over how to calculate your hard money loan, what costs you’ll need to know about, and run through some examples.

Calculate a Hard Money Loan: Maximum LTV

There are two main calculations for a hard money loan.

The first is: What is the maximum loan value a lender will offer?

Every hard money lender has a maximum loan ability. This maximum is based on the property’s after-repair value or ARV.

ARV is what the property will be worth at the appraisal when you sell or refinance. This is the number the property could go for on the open market after you’ve done all your renovations.


Traditional lenders use “loan-to-value,” which means they base their loans on the cost of the property. 

But hard money is designed for real estate investing, so they lend with the assumption that your property is value-add. It’s a property that needs work, and when you put in the work, the home will be worth more in the future.

The after-repair value is what hard money lenders base their loan on. Most lenders will lend somewhere between 70-75% of the ARV. However, the actual loan-to-ARV percentage you get depends on factors like experience, credit, etc.

Most hard money lenders will only approve a loan for an amount you can actually afford. These lenders want two things:

  1. To get their money back.
  2. For you to make money.

75% ARV is the average amount they can lend safely. This amount estimates that you’ll be able to both pay all your costs and still make a little profit for yourself.

Max LTV for Hard Money Example

Let’s look at an example. We’ll keep it as simple as possible and say our ARV is $100,000. This loan amount is likely unrealistic depending on your market, but this calculation works the same with any number.

If $100,000 is our ARV, that means it’s the absolute maximum any hard money lender could loan you. In rare situations, a hard money lender may loan you up to 100% of your ARV.

More common, however, is that you get 75% of your ARV. To figure out this number, you just multiply your ARV by .75:

ARV  ×  % of ARV  =  Loan Amount

$100,000  ×  .75  =  $75,000

$75,000 is the realistic maximum loan you can expect from a hard money lender for a property with an ARV of $100k.

Calculating the loan-to-ARV for a hard money loan is only the first calculation, though…

Calculate a Hard Money Loan: Maximum Actual Loan 

If the first question is what is the maximum loan amount you can get, then the second question is: What’s the actual amount they’ll lend?

You might hear a hard money lender say they’ll lend up to “80/100” or “90/100” – let’s go over what that means.

How to Figure Out Actual Loan

You’ll notice there are two numbers with a slash in between.

The first number is the loan-to-cost (not ARV). For example, if it’s 90/100, that means they’ll lend up to 90% of what you bought the property for. 

The second number is the rehab cost. In the 90/100 example, the lender would give you 100% of the costs needed to fix up the property.

So in this case, they’ll offer you a loan that covers up to 90% of the purchase price and 100% of the rehab costs.

But remember: there’s still the overall maximum loan of $75,000 that we can’t go over.

Calculate Your Costs for a Hard Money Loan

So say a lender tells you they can loan 90/100 and 75% of the ARV, and your ARV is $100,000. That means they’ll give you 90% of the purchase cost + all the construction costs, but that total number can’t be more than $75,000.

Let’s break this down with some simple examples.

Don’t Forget Closing Costs

We’ll say we’re buying a property for $60,000, and it will take $20,000 to fix up.

There’s one more number many real estate investors fail to include here: closing costs. This number includes:

  • What you pay the title company, escrow attorney, or whoever performs the closing.
  • Lender origination fees.
  • Title costs.
  • Insurance.
  • Anything else that goes into the closing of a transaction.

Your closing costs will be dependent on your purchase price. For our $60k property, closing costs will be somewhere between $1,800 and $3,000. We’ll go with $3,000 for our example.

90/100 Hard Money Loan Example

Here are the numbers broken down for our current example. How do they work out for a 90/100 loan?

Purchase Price:  $60k

Rehab Costs:  $20k

Closing Costs:  $3k

Total:  $83k

Now, if the lender offers 90% of the purchase price, they’d cover $54,000 on this property. That leaves $6,000 (aka, 10%) you’ll have to cover.

They’ll also pay for 100% of the $20,000 construction costs. So as long as you stay in-budget, there will be no out-of-pocket costs there.

A hard money loan covers no closing costs. You’ll need to fund all $3,000 there.

Here’s what we’re left with:

Loan Covers:  $74,000

You Cover:  $9,000

Now you know going in that you’d need $9,000 to make this deal work. 

You can also see that the $74,000 is less than the max LTV of 75% (or $75,000 on this case). But what if our rehab costs were actual going to be $25,000 instead of $20k?

This would push our loan coverage up to $79k. The loan would still only cover $75k, so you’d be stuck with an extra $4,000, totaling your out-of-pocket cost for this property to $13,000.

80/90 Example

To really drive this home, let’s go through the exact same example but with an 80/90 loan.

If the purchase price is still $60k, they’ll give you 80%, so:

$60,000  ×  .80  =  $48,000

Rehab costs are still at $20k, so now the loan would cover:

$20,000  ×  .90  =  $18,000

The total loan amount would be:

$48k  +  $18k  =  $66,000

Your total costs would be:

Purchase:  $12,000

Rehab:  $2,000

Closing:  $3,000

Total: $17,000

For a 80/90 loan, you’ll need to bring in $8,000 more than you would a 90/100 loan.

Other Factors in Calculating a Hard Money Loan

This is a very basic way to calculate your hard money loan. Keep in mind these numbers will shift a bit depending on your qualifications, experience, and credit score.

But even a ballpark number keeps you prepared. And the better prepared you are money-wise, the better terms you can get.

Additional Costs on Your Property

The costs of real estate investing can add up. This is why it’s important to know before closing on a loan – or even before approaching a lender – what you can truly afford.

One more cost that’s easy to lose sight of in the midst of leverage is the carry costs once you actually own the property.

You’ll be paying interest and principal every month, plus the accumulation of taxes, insurance, and potentially HOA costs. These are all amounts that will be coming either out of your pocket or from gap funding sources. 

More Info on Calculating Hard Money Loans

We hope this helps you as you navigate your real estate investment career. Our purpose is to make sure you use hard money correctly, knowledgably, and in the right positions.

Be sure to check out our YouTube channel for more real estate investing breakdowns.

If you have any questions, or a deal you’d like us to run the numbers on, we’d be happy to help. Email us at Info@HardMoneyMike.com.

Happy Investing.

Text: "When to Use Hard Money"

5 Times You Should Use Hard Money for Your Real Estate Investments

Here are 5 ways to use hard money right as a real estate investor.

Real estate investing is all about making profit.

And sometimes, to make profit, you need to use hard money loans.

When is hard money your best option in real estate investing? Let’s look at 5 situations where you should use hard money to fuel your investments.

1. Using Hard Money for Speed

The number one way hard money makes you money in real estate investing is how fast they are.

Look at a real example from one of our clients.

He was able to buy a property in Colorado at a $30,000 discount.

Five other people were bidding as high as $330,000 on the property.

But our client was able to close in less than a week, so the sellers accepted his bid of $300,000.

How Much Does a Hard Money Loan Cost?

People can get tripped up with the cost of hard money. Wouldn’t the price of the loan leave our client at a loss here? Let’s compare his hard money loan on this deal to his competitors with a bank loan.

For hard money, he spent $7,500 on origination. A bank loan would have cost $4,500.

Six months’ worth of interest on the hard money loan adds up to $15,000. The same time on a bank loan would accrue $9,900 of interest.

Appraisal underwriting, and processing fees were lower with hard money at $984 (vs $1500 with the bank.)

Overall, our client did pay a lot more for the loan itself using hard money. His hard money loan cost $23,484, and a bank loan would have cost $15,525. That’s an extra cost of $7,959 to use hard money.

Can You Save Money by Using Hard Money for Real Estate?

Despite seeming more expensive, hard money still gave this investor a discount. Why? Hard money enabled him to close fast, so he got a better deal on purchase price.

What was the total cost of hard money? The discounted price of the property ($300,000) plus the hard money loan costs equals $323,484. 

What about the bank loan? The home price of $330,000 plus bank loan costs totals $345,525.

This is a savings of $22,041. Just for closing fast with hard money rather than using the cheaper but slower bank loan.

Using hard money for speed works even when the discount is smaller.

Let’s say our client had bid only 10,000 less than the other investors. He still would’ve saved $1,191 up front on the deal.

Hard Money Savings without a Purchase Price Discount

The option of buying real estate with bank loans is often cheaper. However, in many investment situations, using a bank loan is not a viable option.

If you have to wait 4 weeks to clear your bank loan, but only 4 days for a hard money loan… that becomes the difference between closing on the property or not.

Ultimately, even if using hard money doesn’t get you the lowest price, you still save money in the long run. If the speed of a hard money loan gets you a property, you will still come out on top.

Buying then selling a profitable fix-and-flip will always make more money than never buying and never selling.

2. Use Hard Money if You Have Low Credit

Institutional lenders, private equity, and banks have credit score minimums. If you don’t have a high enough score, you don’t get a loan.

Hard money lenders, on the other hand, are typically not credit-score-driven. Yes, they’ll probably look at your credit, but they won’t base your loan on it.

Real estate investors can have low credit scores for many reasons:

  • Usage – You put your flip rehab costs on credit cards
  • Thin Credit – You have few lines of credit, or young lines of credit
  • One-time Event – You had good credit, then life happened and your score temporarily dipped.

Hard money lenders understand that these issues are not always a reflection of your ability to pay back loans. 

That’s why hard money lenders don’t worry about your credit score, just your credit.

Do you have a history of late payments? Are you defaulting? That will negatively affect you with a hard money lender. 

If you are responsible with credit, but have a score banks won’t accept, a hard money lender will be a good option.

3. Using Hard Money Because It’s Flexible

Sometimes you need an outside-of-the-box lender.

  • Unique Properties – If you have a house or area that’s unique (maybe a dome house, an old manufacturer, etc.), hard money lenders will give you more options.
  • Rural Areas – Most local banks and large hard money lenders don’t lend outside of MSAs. Traditional lenders might not cover thirty miles outside of an urban area, but many small hard money lenders will.
  • Cross Liens – Hard money lenders have more flexibility putting a cross lien on another property. This is useful if you don’t have a lot of money to put down, but do have another property with a lot of equity.
  • Gap funding – Sometimes a mortgage doesn’t quite cover all the costs of your project. Hard money can fill in those gaps.
  • Lot splits – Splitting off a lot can be a headache with a traditional lender. A hard money lender is more flexible with the time it takes to get a survey and everything else prepared. This allows you to split off a lot, sell the house, and keep the lot.

4. Using Hard Money for BRRRRs

Hard money is crucial for successful BRRRRs.

With BRRRR (rental flips), you:

  • Buy undermarket valued properties
  • With a hard money loan
  • Then rate-and-term refinance into a longer-term loan.

If you want to get into BRRRR transactions (rental properties), you have to find a hard money lender or private lender who will loan you 75-80% of the after-repair value of the property you want to buy.

If you get a hard money loan to fund the purchase price and rehab up to 75-80% ARV, you can maximize your refinance. This saves you money, time, and interest.

5. Other Times to Use Hard Money

There are many other reasons real estate investors use hard money. Here are a few:

  • Banks limit you to 2-3 loans. If you’ve maxed out those lenders, hard money can help.
  • Hard money can work as a bridge loan. It covers the down payment of your next property until your other bank-funded property sells.
  • You can keep a project off your credit. Hard money typically doesn’t show up on your credit report.
  • Investment beginners might need help with their first couple projects started before banks will lend to them.
  • Complete a started project. If you end up with a property mid-flip, many banks won’t lend for it. But a hard money lender can easily provide a gap loan to finish the rehab.
  • Hard money has the flexibility to let you come in with other funding sources. (If you want to put repair costs on a credit card, want to use an OPM lender, etc.).

How to Use Hard Money for Real Estate

Want to learn more about real estate funding? Wondering if a hard money loan might be right for your investment? 

Email us your questions anytime at Mike@HardMoneyMike.com

Or join our weekly Leverage Up call here, every Thursday from 1:15 PM to 2:15 PM (MST).

Text: "Gap Funding & Hard Money How They Work Together"

Gap Funding and Hard Money – How the Real Estate Lending Options Work Together

How do gap funding and hard money go together?

As we move toward a recession, your money as a real estate investor will tighten. Lenders who used to give you 90% of the value of a property will now only offer 80% or less.

Where will you come up with that extra 20% or more? Is real estate in a recession only for those of us with hundreds of thousands of dollars sitting around?

Not at all. Lenders tightening only means that gap funding will become more important for real estate investors.

Let’s look at what gap funding is, how to apply it to your upcoming purchases, and how it integrates with a hard money loan.

What Is Gap Funding?

What does “gap funding” mean in the real estate world?

Gap Funding Definition

Gap funding is the money you bring in from another source to fill any gap left between the lender and the project costs.

If a lender offers you 70% of the LTV on a property, gap funding is how you fill in the remaining 30%. Usually gap funding is secured, although unsecured gap funding is possible. 

A “secured” loan means that the debt is backed by a piece of collateral. In a typical gap funding scenario, the loan is secured by the property being purchased.

For the most part, you won’t be able to find a gap lender at an institution like you can a bank lender. Instead, gap lenders are family members, friends, or someone you know.

OPM vs Gap Funding

You can use a couple gap funding terms interchangeably:

  • gap funding
  • gap lending
  • OPM (other people’s money)
  • real people’s money

All of these terms get at the same concept. It’s money, not from you and not from an institutional lender, that covers whatever costs of an investment property that your lender won’t fund.

OPM can cover up to 100% of a deal, but for now, we’ll be talking about it in a strictly gap funding sense. These are loans that fill in the holes of a project that a mortgage or hard money loan wouldn’t cover.

Gap Funding for Flips

During a time when lenders are offering less money up-front for investment deals, you might need more money to fill in the gaps on your fix-and-flip projects.

Here are a few phases where you might need gap funding on your project.

Down Payments

Hard money lenders require at least 10% as a down payment. This is a very common use for gap funding.

If you use gap funding for your down payment, you’ll need to find out right away whether or not your hard money lender will accept a secured gap loan on the property.

Construction Costs

Another way to use gap funding for flips is for construction costs – rehab, repair, or anything necessary to bring the house up to the ARV and onto the market. These expenses can rack up fast, and they may not be completely covered by the main loan for the flip.

Carry Costs

Some investors will only use gap funding for the carry costs during their flip. 

The lender will pay the mortgage payment, the insurance, or whatever other monthly costs are required during the project. Having a gap lender for carry costs can smooth out a fix-and-flip experience.

The Reach of Gap Funding for Fix-and-Flips

It’s possible to coordinate with your gap lenders to cover all three of these additional costs. This is a common way investors successfully finish fix-and-flips with zero money down.

You can use gap funding however you need, as long as both the hard money lender and the gap lender agree that the loan fits their criteria. 

Not all hard money lenders allow you to secure your gap loan with a lien on the property you’re closing on. And not all gap lenders will loan to you unsecured.

Gap Funding for BRRRR

Gap funding is also used for BRRRRs, and works much like fix-and-flips. The biggest differences happen at closing.

Gap Funding Process During BRRRRs

BRRRR gap funding can be used the same way as a fix and flip: down payment, construction, or carry costs.

For BRRRR though, you need to close the gap funding loan on the same day as closing. You’ll also need to be sure you close the gap funding at the title company, with your lender. So you’ll need to know in advance that your hard money lender allows gap funding with a lien on the property.

Protecting Your BRRRR Refinance While Using Gap Funding

If you close your gap loan too late or incorrectly, your long-term lender can consider your refinance cash-out, not rate-and-term. This will lower the LTV on your refinance.

It’s important to get the money for your loan back in the refinance. In a good BRRRR transaction, you walk away with a house that’s cash-flowing and little to no money out of your pocket.

How to Calculate Gap Funding

How do you calculate what you’ll need for gap funding? It depends on each project.

Calculating Gap Funding Needed for a Project

The way to figure out the gaps in your project is simple:

(Cost of Property + Rehab Costs) – Hard Money Loan Amount = Gap Funding Amount Needed

If the property costs $200,000, but your lender gives $140,000, there’s a $60,000 gap you’ll need to cover. You can:

  1. Pay the $60,000 out-of-pocket


  1. Bring in a gap lender, enabling you to buy the property with 100% financing. You would likely use part of this loan for the down payment and part for construction costs.

How to Calculate Construction Costs

Most hard money lenders use the ARV (anticipated retail value) rather than LTV (loan in relation to the current sale value).

In case your loan is for LTV only and doesn’t take into account construction costs, here’s how you would calculate those costs for an undermarket home:

ARV  –  Actual Cost of Property  =  Maximum Construction Budget

It’s important for you to work these numbers and know your budget up-front. Keep in mind, it’s always better to err on the generous side with your numbers. You want to be sure you can get done on-time and within the budget allotted by your hard money and gap lenders.

Ways to Secure a Gap Loan

So when you hear the advice to “secure” your gap loan, what does that mean? How do you secure a gap loan? And why?

Securing with Two Lenders

Securing your loan involves both your hard money lender and your gap lender.

Your friend or family member is giving you a fairly large chunk of money. They’ll want to know how you’ll secure it for them. 

Securing your gap lender’s loan involves putting a lien on the property. Does your hard money lender allow this? Not all lenders will.

If Your Hard Money Lender Doesn’t Allow a Lien

If your hard money lender does not allow a lien on the property, you’ll have to secure the loan with a different property.

You could either put the lien on your own home, or you could use another rental or investment property.

If They Do Allow a Lien

If your hard money lender does allow a lien on the property to secure a gap loan, it’s best to do during closing with the mortgage and deed. This way title records it, and you have evidence for your gap funder that it’s recorded.

Many gap lenders – especially if they’re family or friends – won’t be educated enough about the real estate world to understand how to secure  their money. As the investor, it’s your responsibility to keep your lenders’ money safe.

Securing the Loan

No matter which property has the lien, you’ll have to take a few important steps to secure the gap loan. 

You’ll need a note – a promissory note between you and your gap lender – and a lien, either a mortgage or a deed of trust. And you’ll have to record all this with the county.

To make sure the loan is concerned, be sure to check all these boxes. It’s important to do this thoroughly so your lender will:

  • Get their money back
  • Feel comfortable with the deal
  • Want to lend to you again
  • Recommend you to their network

For More Help on Gap Funding and Hard Money

Gap funding and hard money are big, important concepts that work together for real estate investors.

If you’re left with questions, you can reach out to us at info@hardmoneymike.com, on Facebook, or at HardMoneyMike.com. 

We’re more than happy to answer specific questions on specific deals.

You can also check out these videos on gap funding and OPM.

Happy Investing.

Text: "Finding Hard Money Bridge Loan Lenders"

Where Do You Find a Hard Money Bridge Loan Lender?

Does every hard money lender do bridge loans? Where do you find a hard money bridge loan lender?

A lot of people use the term bridge loan interchangeably with gap funding or hard money, but a true bridge loan is slightly different. They’re shorter-term than a hard money loan, and they’re typically less expensive because of that.

Is a Bridge Loan Different from a Hard Money Loan?

A hard money loan is longer and broader than a bridge loan.

  • The average bridge loan lasts 30 to 45 days. Hard money loans can last up to a year or longer.
  • Bridge loans get you from one property to the next. Hard money focuses more on a single project.
  • Bridge loans get paid when your old property sells. Hard money loans get paid when you refinance or sell the property the loan was originally for.
  • A bridge loan is used as temporary funds to close on a house. A hard money loan can be used as a more general budget for a purchase. Many come with the option for escrows to fix up the property over time.

Typically bridge loans are used for 3 situations in real estate investing. When you:

  1. Are buying a new property and already have one listed for sale
  2. Need to cover down payment on a new property
  3. Find a great deal but your bank’s financing won’t be ready in time.

What Lender Give Bridge Loans?

To find these quick, short loans, a small local lender (like Hard Money Mike) will be your best and fastest option. Smaller hard money lenders prefer working with deals that provide good, safe returns. Bridge loans do exactly that.

A bigger hard money lender will do a bridge loan, too. But they may take up to four weeks to close, which often defeats the purpose of true bridge lending.

You can also get bridge loans from some banks. Not big, national banks, but many local banks and credit unions who work with real estate investors may do bridge loans, too. Banks usually offer the cheapest bridge loans, but can take 3 – 4 weeks or longer.

Ask around to hard money bridge loan lenders you know to learn their pricing and see if it’s worth it. You can use our free loan optimizer to find out if you can get a good deal on bridge loans near you.

Read the full article here.

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