How to use Hard Money

By October 31, 2019 Blog

Using Hard Money to invest in real estate is not overly complicated. It is actually a fast and easy solution to financing your deals. But there are a couple things you will need to know and pay attention to.

First and foremost you need to know that hard money loans are based mainly on the ARV (After repair value) of the house. What this means is that the lender is essentially looking at the property as to what is the level of risk associated with the loan. The borrower still plays a role, just usually not as significant of a role as they would with a traditional bank.

Keeping this in mind gets you to the best way on how to use hard money loans. The better the deal – the easier the hard money loan will be!

Although hard money is normally fast and easy, it’s not the cheapest way to finance your deal. If you are looking for cheap long term financing, hard money loans are most likely not the solution. But they do serve a great purpose to be the bridge to that long term financing. For Rentals, this strategy is often referred to as BRRR. It stands for buy – rehab – rent – refinance. The hard money loan allows you to come in from a “cash” position and get the deal. This is the “cash, close in 10 days” approach. This method works great and we will detail it more in another article, so check back with us soon.

For short term deals – like Flips – hard money is great! It allows you to come in with a strong offer and close quickly. The way you would use it is to: 1. put a property under contract, 2. apply with hard money lender (use us! use us! haha!!!), 3. get funded and close. It’s that easy! Just like you would buy a new toilet to complete the deal, you basically are paying fees and costs to “buy” the money for your deal. It becomes an expense to the deal — but for a lot of people, it is what allows them to go do the deal in the first place. This can be similar to a “no money down” strategy if used correctly.

Using hard money in either of these 2 ways – or both! – is a great proven method to buying real estate and building wealth. It doesn’t always take a ton of money to get started and do a deal – but it does require knowledge.

Contact us if you want to learn more and how we can help get you into deals using private hard money loans.

Flip House Funding Texas.

Author Kyle O'Keefe

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