Tag Archive for: Hard Money

Private Money vs. Hard Money: What’s the Difference for Real Estate Investors?

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Today we are going to discuss hard money vs private money. As a real estate investor, you’ll hear the terms private money and hard money tossed around a lot. Both can help you fund deals, but they come with key differences. Knowing these can save you time, money, and stress.

Let’s break it down.

Hard money loans come from professional lenders. These lenders specialize in quick, short-term loans for real estate deals like flips or rentals. Hard money often means higher interest rates and fees, but you get speed and reliability in return. For example, if you find a fix-and-flip deal that needs to close in 10 days, hard money might be your go-to.

Private money, on the other hand, usually comes from individuals—friends, family, or other investors. These loans often have flexible terms since the lender isn’t a professional. Imagine asking a retired family member to fund your next rental in exchange for interest payments. With private money, relationships matter more than a credit score.

So, which is better, hard money vs private money? It depends on the deal. If you need speed and structure, hard money may be the answer. If flexibility and trust are key, private money might work best.

Contact Us Today! 

Which is best for you, hard money vs private money? Contact us today to find out more!

Free Tools For You! 

We also have free tools available! Download the Loan Optimizer to compare financing options side by side!  

Learn more!

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

What Is Hard Money?

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Today we are going to answer the question, “What is hard money?” Hard money is a quick and flexible way for real estate investors to get funding. It’s different from traditional loans. Instead of banks, private lenders provide the cash. The loan is backed by the property itself, not your credit score or income.

Think of hard money as a bridge. It helps you close deals fast or fix up properties when traditional lenders might slow you down.

For example, let’s say you find a fixer-upper with huge potential. A regular bank says no because the property needs repairs. A hard money lender, on the other hand, sees the property’s future value. They offer you a loan based on that. This gives you the chance to buy the property, renovate it, and either sell it or refinance with better terms later.

The trade-off? Hard money loans often have higher interest rates and shorter terms. They’re not meant for long-term financing, but they’re a powerful tool when used wisely.

If speed and flexibility are key, hard money can open doors that traditional loans keep shut. It’s about making the deal work, even when the numbers seem tricky.

Ready to learn how to use hard money the right way? Stick around for more tips and insights!

Contact Us Today! 

What type of financing is right for you? Contact us today to find out more about real estate investment loans!

Free Tools For You! 

We also have free tools available! Download the Loan Optimizer to compare financing options side by side!  

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 Guarantee 100% Financing for BRRRR Properties

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Investing in BRRRR properties (Buy, Rehab, Rent, Refinance, Repeat) can be a great way to grow your real estate portfolio. However, one big question always pops up: How to guarantee 100% financing for BRRRR properties? With some careful planning and understanding of the numbers you can set yourself up for success. Let’s walk through the steps.

Step 1: Know Your Maximum Loan Amount

Before diving into the deal, you need to know how much your lender will finance. This comes down to two key numbers: your After Repair Value (ARV) and your lender’s Loan-to-Value (LTV) ratio.

What is ARV?

ARV is the expected value of your property after repairs. It’s what you can sell it for or the appraised value when you refinance.

Loan-to-Value (LTV)

LTV is the percentage of the ARV that your lender is willing to lend. Most lenders offer 70-75% of the ARV. So, if your property’s ARV is $200,000, and your lender offers 75% LTV, they’ll lend you $150,000.

Here’s a quick example:

  • ARV: $200,000
  • LTV: 75%
  • Maximum Loan Amount: $150,000

Step 2: Fit All Costs Under Your Loan Amount

To guarantee 100% financing, all your costs need to fit under the maximum loan amount. Your costs typically include:

  • Purchase Price
  • Rehab Costs
  • Closing Costs

For example, if your maximum loan is $150,000, your purchase price, rehab, and closing costs need to total $150,000 or less.

Example:

Let’s say you have the following costs:

  • Purchase Price: $100,000
  • Rehab: $40,000
  • Closing Costs: $5,000

Total costs = $145,000. Since this is under your $150,000 maximum loan, you can cover all your costs with the loan, meaning 100% financing!

Step 3: What Happens if Your Costs Are Over?

Sometimes, your costs may exceed the maximum loan amount. For instance:

  • Purchase Price: $120,000
  • Rehab: $40,000
  • Closing Costs: $5,000
  • Total Costs: $165,000

If your loan maxes out at $150,000, you’ll need to bring $15,000 of your own money to the table. This is why it’s crucial to carefully estimate your costs and compare them to your maximum loan.

Tips for Securing 100% Financing

  • Plan Your Rehab Costs Wisely: Keep your rehab within a budget that fits under the loan amount.
  • Negotiate Purchase Prices: The lower you negotiate the purchase price, the more room you have for other costs.
  • Include Closing Costs: Some lenders allow you to roll closing costs into the loan, which can help with 100% financing.

Conclusion

Getting 100% financing for BRRRR properties is possible when you know your numbers and plan carefully. Focus on maximizing your ARV and keeping your costs within your lender’s loan limit. Contact us today if you have questions about fitting everything under your loan, tools like loan calculators can help you run the numbers before you commit. 

Watch our most recent video to find out more about: How to Guarantee 100% Financing for BRRRR Properties

Airbnb Investment Property

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What exactly is an Airbnb investment property and is it the right choice for you? Today we will be taking a closer look!

What is an Airbnb?

An Airbnb is a vacation rental as opposed to a long-term rental property. Think about a small cabin in a popular hiking town or a beachside condo. People are able to book short stays, which can bring in more money than a traditional rental. 

How can an Airbnb help me?

Airbnb properties also give you flexibility. You can use the property yourself or rent it out when you want. Some investors start by renting their home part-time, testing the waters, and seeing how much they can make. A well-located and nicely furnished space can attract guests, especially if you offer extras like a guide to local spots or cozy decor.

Check out an Airbnb as an investment property! 

There are challenges, of course, like dealing with cleaning, guest management, and local regulations. But with the right setup, many investors find it worth it. And since you’re earning nightly, the income adds up quickly, giving you cash for future investments. In short, Airbnb properties can be a solid way to build wealth through real estate.

Contact Us Today! 

Is a Airbnb right for you? Contact us today to find out more about investment properties!

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! 

Second Mortgage vs Hard Money

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When it comes to borrowing money for real estate investments, two common options are second mortgage vs hard money. Though they might sound similar, they have important differences.

Second Mortgage

A second mortgage is a loan you take out on a property that already has a first mortgage. Let’s say you own a house worth $200,000, and you still owe $100,000 on your first mortgage. If you take out a second mortgage for $30,000, your total debt would be $130,000. The second mortgage usually comes with a lower interest rate than a hard money loan, and it’s often offered by traditional lenders like banks or credit unions.

Hard Money Loan

On the other hand, a hard money loan is a short-term loan secured by real estate. Hard money lenders don’t care much about your credit score; instead, they focus on the property’s value. These loans are easier to get quickly, which makes them great for fix-and-flip investors or anyone needing fast access to cash. The downside? They come with higher interest rates and shorter terms than a second mortgage.

Example:

For example, if you’re flipping a house and need quick cash to buy the property, a hard money loan might be a good choice. But if you’re looking for a longer-term loan with lower payments, a second mortgage could work better.

Both have pros and cons, depending on your investment goals. 

Contact Us Today! 

Which is best for you? Have you compared a second mortgage vs hard money loan best for you ? Contact us today to find out more!

Free Tools For You! 

We also have free tools available! Download the Loan Optimizer now to see what changes you need to make in order to get on the right path.

Learn more!

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

Hard Money vs Private Money: Do You Know the Differences?

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Today we are going to discuss hard money vs private money. As a real estate investor, you’ve probably heard terms like hard money and private money thrown around. While they may sound similar, these two types of loans have important differences that can impact your deals. Therefore, by knowing which one is right for you can save time, money, as well as stress.

What Is Hard Money?

Hard money loans are usually offered by local institutions or individuals. To clarify, these loans focus on the property’s value as opposed to your credit score or experience. Here’s how they work:

  • Asset-Based Lending: Hard money lenders care more about the deal rather than your financial history.
  • Flexibility: Hard money loans offer flexible terms, therefore making them ideal for unique deals like cross-collateralization or projects needing 100% financing.
  • Quick Approval: If you need fast funding in order to close a deal, hard money loans are your best bet. Approval can happen in days, not weeks.

Example

You find a great fix-and-flip project but need 100% financing: A hard money lender might offer that if the deal makes sense. They focus on whether the property has enough value, rather than your credit score.

What Is Private Money?

Private money loans usually come from larger lenders backed by Wall Street funds. These loans have stricter requirements, however they often offer lower rates for those who qualify. Here’s what you’ll find:

  • Stricter Criteria: Private money lenders look at your experience, credit score, as well as liquidity.
  • Lower Rates for Experienced Borrowers: If you’ve flipped several properties or have solid financials, you may get better rates.
  • Fixed Guidelines: Private money lenders have specific loan programs you must fit into, such as 90% purchase financing and 100% rehab costs.

Example

You’re an experienced investor looking to fix and flip a property. A private money lender could offer better rates if you have a high credit score as well as some money to put down.

Key Differences Between Hard Money and Private Money

Feature Hard Money Private Money
Focus Property’s value and deal strength Investor’s credit, experience, and liquidity
Flexibility Highly flexible, deal-specific Strict guidelines, fits into specific boxes
Approval Time Fast approval, often within days Longer approval process
Down Payment Can offer 100% financing for strong deals Typically requires 10% or more down
Best For New investors, quick closings, unique deals Experienced investors with time to qualify

When Should You Use Hard Money?

Hard money loans are perfect if you:

  • Need fast funding for a time-sensitive deal
  • Have little experience but found a solid investment
  • Require creative financing, such as cross-collateralization
  • Are dealing with smaller or unique properties

When Should You Use Private Money?

Private money loans might be your best option if you:

  • Have experience with flips or rental properties
  • Have a strong credit score and liquidity
  • Want lower interest rates
  • Can wait longer for approval

What’s Best for You?

At the end of the day, hard money and private money both have their place in real estate investing. However, if you need flexibility, quick approvals, or 100% financing, hard money is the way to go. On the other hand, if you have a solid track record and can fit into stricter guidelines, private money may save you some costs.

Need Help Finding the Right Loan?

At Hard Money Mike, we offer tools like our Loan Cost Optimizer to help you compare hard money and private money rates. Whether you’re looking for 100% financing or need a specific loan for your fix-and-flip, we’re here to help you get the deal done.

If you have questions or need guidance, leave a comment below or contact us for more details. We’re here to help you find the best option for your next project!

Watch our most recent video to find out more about Hard Money vs Private Money.

Hard Money vs. Private Money Loans: What’s the Difference?

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Sometimes these terms are used in similar situations, but what actually makes private money loans different from hard money?

One of the most beautiful and attractive aspects of real estate investing is its accessibility.

Anyone can enter the game and create wealth, provided they understand their available options and use other people’s money (in the form of loans, etc.) to fund their projects. This is called using leverage.

The best leverage for each deal might be a little different. Sometimes you need to close quickly. Sometimes you need to prioritize low interest rates. 

Whatever the top priority, private money and hard money are tools to have in your investing toolbox.

Private Money Loans vs. Hard Money Loans

Hard money loans have been around for a long time, but recently we’re seeing a rise in private money loans.

Knowing the differences between the two can help you find the best deal for the specific needs of your project.

1. Credit Scores

  • Hard Money: Credit scores aren’t typically a factor. 
  • Private Money: Score based.

Instead of looking at your credit score, hard money lenders look at your financial history for things like bankruptcy, foreclosures, etc. 

Additionally, not only is hard money not determined by your credit score, but hard money loans can also be used to help fix your credit score (something that private money isn’t necessarily designed to do).  

If you have concerns about your credit score, check out our information about usage loans.

2. Flexibility

  • Hard Money: Super flexible and great for unique projects! 
  • Private Money: Less flexible, often better for larger communities.

If you have a project that’s a bit outside of the box, hard money is often the way to go since these loans aren’t restricted as much as traditional bank loans.

In contrast, private money tends to be best for projects that are a bit more “typical” in real estate investing. It can be tricky to get private money loans below $125,000, so if you’re looking for a fast, small loan, hard money might be a better deal.

3. Loan to Value

  • Hard Money: Up to 100% financing.
  • Private Money: Typically maxes out at 70% of the repair value and 90% of the purchase.

Sometimes you can find private money loans with great terms, but typically hard money can offer higher LTVs.

4. Markets

  • Hard Money: Local.
  • Private Money: National.

Private money has the advantage over hard money when you’re looking in larger communities. Most hard money lenders have smaller areas (or two or three states) they specialize in, and they like to stay focused on those areas.

5. Pricing

  • Hard Money: More expensive.
  • Private Money: Less expensive.

If you’re in a large city, and you’re looking for the best pricing, private money will typically be less expensive than hard money. 

It’s important to note that the difference in cost between these loans is often in the points, not the rate. 

Often, hard money loans are anywhere between 2 and 3 points, with loans around 6-9 months. In contrast, private money loans are often closer to 1-1.5 and offer longer loans of 12-18 months.

Which Loan is Better?

It depends what you need!

If you need a flexible, quick loan with higher LTVs that isn’t going to penalize you for a less-than-spectacular credit score, hard money is the way to go.

If you need longer terms, better points, and something that’s designed for larger communities and typical projects, check out private money loans. 

Explore Our Resources

Real estate investing is great, and both of these loans should be in your investing toolbox. 

If you want to explore a hard money loan, feel free to contact us at Info@HardMoneyMike.com. We’re always happy to talk through a deal or help you figure out what sort of loans are right for you.

You can also check out the free tools on our website or our YouTube channel where we offer investment tips and tricks. Our #1 goal is that you feel confident and equipped to succeed as a real estate investor. 

Happy investing!

How to Get 100% Fix and Flip Financing

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The key to real estate investing is leveraging other people’s money to cover your fix and flip financing.

Getting your fix and flips covered 100% comes down to 3 things:

  • Finding the right money 
  • Striking at the right time 
  • Understanding hard money

Especially for new investors, hard money (also called private money) loans are usually the key. Hard money is flexible and often has less rigid requirements than more traditional loans. This makes them perfect for fix and flips.

3 Ways to Get 100% Financing for Fix and Flips

Especially in today’s real estate climate, using hard money is a crucial link in the chain of building wealth. 

Rates are high and a lot of banks are offering fewer loans. So where are you going to find the money?

There are three strategies that help you leverage hard money to build wealth by covering 100% of fix and flip financing.

1. Find Great Deals

This may seem obvious, but it’s more important to be strategic than ever before. 

Look for properties that have a minimum 70% ARV (After Repair Value). Take your time to make sure you’re finding properties that are going to have a solid return. Don’t take risks on properties that aren’t likely to flip.

Remember: it’s better to have 2-3 solid deals than 6-8 bad or marginal deals.

So look for those 70% ARV properties.

2. Cross Collateralize

Sometimes called “crossing,” this strategy lets you use one property to get another at 100%. 

If you have another rental, a home, or a fix and flip that’s hit the market, you can use that property as leverage to get the next property. 

You will need to have a mortgage on both properties. Doing this basically gives the lender more protection. If you’re confident that you’ve picked good properties with high ARVs, then cross collateralizing is a fairly low-risk move on your part.

As long as you get that flip done and paid off, then both liens are released once you sell the new flip. 

3. Find a Cosigner

Again, this strategy helps lenders feel more secure on their end. If you’re a new investor, it can be helpful to find a guarantor with the assets who’s willing to cosign on a loan. 

As with crossing, as long as you’ve selected strong properties, this is a low-risk strategy that simply allows you to get 100% financing that you can pay off when you resell the property. 

Your guarantor should never need to pay a cent, but it makes it easier for the lender to approve financing. 

Fix And Flip Financing Made Easy

The market is gearing up to be great for real estate investors. Don’t be afraid to start your investment journey. Just remember:

  • Find great deals
  • Cross collateralize 
  • Find a cosigner

Hard money loans are a great place to start. They’re flexible, and you’re more likely to find 100% financing through a hard money lender, especially as a new investor.

If you do end up needing DSCR or other traditional loans, you can check out our sister company, The Cash Flow Company. 

If you’re interested in discussing a deal, reach out to us at Info@HardMoneyMike.com. We’re always happy to run through deals and answer questions.

How to Finish the Project With a Hard Money Loan

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If you have a property that’s draining your cash, look into a hard money loan that can help you finish the project and get it off your plate.

A lot of clients reach out to us who have started a project – a flip, a rental, etc. – and are struggling to reach the finish line. 

Delays in the real estate world can quickly cost thousands of dollars, so how can you avoid those issues with a hard money loan?

The Problem With Stalled Projects

Stalled projects cost money in a few different ways.

1. Payments: 

You have taxes, insurance, and loan payments for as long as you are in charge of that property. The longer you hold onto the property, the longer those payments are coming out of your pocket.

2. Missing the Market:

Real estate markets move fast. Although a delay of a month or two can feel small, missing the market often makes it difficult to sell the property. 

The most common way around this is to lower the asking price by a few percentage points… which is then more money that you’re not making in that deal.

Why Should You Get a Loan to Finish a Project?

Let’s look at some real numbers you might encounter if you were struggling with a stalled project:

For even a two month delay, a project can easily cost $5,700 in payments alone. 

Let’s consider the fact that this investor also likely missed the peak market. If they were hoping to sell this property for $400,000, then decreasing the asking price by 5% would immediately result in a $20,000 market loss. 

That is both discouraging and super costly… but it’s also avoidable with the right kind of loan.

How Does Hard Money Help?

If your project is 60-70% complete and you just need a loan to help you cross the finish line, hard money loans might be right for you.

These loans are flexible. Because you’re not looking to pay off the full amount, only cover the last leg of the project, it’s typically easy to work out a deal with a lender.

A Finish a Project loan does not take over everything. It doesn’t refinance the project. They’re designed to help you complete what you’ve started as quickly as possible. That way you don’t miss out on the market or get stuck with months of additional payments. 

Looking for a Finish a Project Loan?

If you’re interested in a Finish a Project loan, reach out to us! You can check out our page about these particular loans or contact us at Info@HardMoneyMike.com.

We’re more than happy to discuss your options and help you find the right path towards your success.

Happy investing!

Why You Shouldn’t Use a DSCR Loan for a Fix and Flip

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A DSCR loan is great for rentals, but why don’t they work for flips?

DSCR loans definitely have their place in the real estate investor’s arsenal. But if you’re trying to do a fix and flip, this loan might not be the right fit for you.

How Does a DSCR Loan Work?

DSCR stands for Debt-Service Coverage Ratio and is a loan particularly suited for rental properties. Like any other traditional loan, a DSCR is able to fund up to 80% of the purchase price or appraisal, whichever is lower.

For example, if you have a $200,000 property, the DSCR will cover up to $160,000 (80% of the total purchase price). This leaves $40,000 left for you to cover on your own.

As mentioned above, this loan is very well-suited for properties that generate steady cash flow (like a rental), but they can be more difficult to work with in the fix and flip game.

Why You Shouldn’t Use DSCR for Flips

You Need to be Rent Ready to Get a DSCR

In order to qualify for a DSCR appraisal, a property must be rent ready. This creates a lot of hurdles in the fix and flip world since many flippers are doing more than basic cosmetic repairs. 

DSCRs Have Prepayment Penalties

Most DSCR loans come with prepay penalties. These penalties typically come in 3- or 5-year plans. Again, in a rental market where you’ll be holding onto the property for longer amounts of time, you typically don’t need to worry about the prepay. 

However, the fix and flip market moves quickly. DSCRs penalize investors who pay off these loans quickly, something fix and flip investors often work towards.

You’ll Pay More For Rehab

In addition to the remainder of the purchase price, DSCRs don’t cover renovation costs. This means that even more money will need to come out of your pocket. 

Make Sure Your Loan Fits the Project

DSCRs are a great product for rental properties. However, if you’re looking at doing a fix and flip, take a look at other types of loans.

The most flexible loans are going to be hard money (also called private money) loans. 

We have a ton of free tools on our website that can help you find the right loan to fit your project. We’re also happy to chat with you about any particular deals or questions you have. 

Just reach out to us at Info@HardMoneyMike.com.