What Is a Hard Money Loan and How Can It Help You Flip Houses

If you’re getting into house flipping, you’ve probably heard the term hard money loan thrown around. But what exactly is it, and how can it help you fund your first (or next) flip?

🔹 What Is a Hard Money Loan?

A hard money loan is a short-term, asset-based loan primarily used by real estate investors to purchase and renovate properties. Unlike traditional bank loans, hard money loans focus more on the property’s value rather than the borrower’s credit score.

✅ Fast Approval – Hard money lenders can fund deals in days instead of weeks.

✅ Flexible Terms – Loan structures are tailored to real estate investors.

✅ Property-Based Approval – The house you’re flipping acts as collateral.

🔹 How Do Hard Money Loans Work?

1️⃣ Loan Amount – Typically 70-90% of the property’s After-Repair Value (ARV).

2️⃣ Interest Rates – Higher than traditional loans, usually 8-15%.

3️⃣ Loan Term – Short-term, typically 6-12 months.

4️⃣ Down Payment – Most lenders require 10-25% down.

5️⃣ Fees – Expect loan origination fees (points) around 1-5% of the loan amount.

🔹 When Should You Use a Hard Money Loan?

✅ You’ve found a profitable flip but don’t have the cash to buy it outright.

✅ You need fast financing to close a deal quickly.

✅ You plan to sell or refinance the property within a year.

💡 Tip: Always run the numbers to ensure your flip’s profit covers the cost of borrowing!

🔹 Is a Hard Money Loan Right for You?

Hard money loans are a powerful tool for house flippers who need quick funding, but they come with higher costs. If used wisely, they can help you scale your flipping business faster than using cash alone.

Thinking about using a hard money loan for your next flip? Let’s talk! 🚀