For some, hard money loans are the last resort. For others, they are the first choice. In our opinion, hard money is best suited for the individual who has a well defined exit strategy and knows how to execute it, but speed and simplicity in acquiring the funds is of the utmost importance to the borrower and therefore necessitates using a funding source other than traditional institutional lenders. In its simplest form, it is interim financing, not a permanent solution. It is the capitalization that gets the investor from point A to point B. Point B is usually a sale in the case of a fix and flip or land development or a recapitalization with a more economical source of funds, as in the case of re-positioning a distressed property and getting permanent funding, once stabilized. The reasons for borrowing hard money vary, but can usually be summed up by speed, reliability and return on investment. Finally, that while hard money is always more expensive than an institutional loan, it is almost always considerably less expensive than completely relying upon equity capitalization (you pay a hard money lender significantly less than equity partners).
Please feel free to read our white paper on the pros and cons of borrowing hard money. We hope that you find it informative.
If you have a prospective transaction, we are happy to discuss it with you. We are quick to tell you what our level of interest is in your deal.