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How do hard money loans work? A plain guide for flippers
A hard money loan is a short-term loan based on the property and the deal. Here is how the amount is set and what happens between your first numbers and closing.
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Your loan amount shows as you type. Send the deal and a loan officer follows up.
Estimate only. Loan amount is the lower of 100% of purchase plus rehab or 70% of the sale price when finished (after-repair value). Minimum loan $150,000. Business-purpose loans on investment property.
What a hard money loan is based on
A hard money loan is based mainly on the property: what you pay, what the work costs and what the house will be worth when it is finished. That is why investors use it for houses a bank will not lend on.
How the loan amount is set
The lender compares your total cost with a share of the after-repair value and lends the lower amount. With us that is 100% of your purchase and rehab, up to 70% of the after-repair value.
| Deal | Amount |
|---|---|
| Purchase price | $210,000 |
| Rehab budget | $70,000 |
| Total cost | $280,000 |
| After-repair value | $380,000 |
| 70% of after-repair value | $266,000 |
| You bring | $14,000 |
| Loan amount | $266,000 |
Hard money loan requirements to expect
Every lender sets its own requirements. Expect to be asked about the deal first:
- The purchase price, usually with the contract
- The rehab budget and scope of work
- Your estimate of the after-repair value
Our known terms are below. Start with the terms box to see if your deal fits.
| Term | Houston Private Money |
|---|---|
| Purchase price funded | 100% |
| Rehab budget funded | 100% |
| Loan limit | 70% of after-repair value |
| Time to close | 5 days |
| Smallest loan | $150,000 |
| Where we lend | Houston area |
From terms to closing
- Enter your three numbers and see your loan amount.
- Send the deal and a loan officer follows up.
- Close in 5 days.
Questions investors ask
Straight answers about how do hard money loans work.
What is a hard money loan?
A short-term loan to a real estate investor that is based on the property and the deal. It is commonly used to buy and renovate a house for resale.
Who uses hard money loans?
Real estate investors, most often to buy and renovate houses for resale.
What is after-repair value?
After-repair value, or ARV, is what the house should sell for once the rehab is finished. It is usually based on recent sales of renovated houses nearby.
What is the smallest loan you make?
Loans start at $150,000.
How fast can you close?
We can close in 5 days.
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