Is Hard Money Lending Right For You?

Is Hard Money Lending Right For You?
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Is Hard Money Lending Right for You?

Real estate investing can be both exciting and lucrative, and many beginning investors discover that hard money financing is instrumental to their success. Learning about hard money can be an important step, whether you plan to buy and sell real estate as your primary occupation, or as simply as a source of extra income.

Before applying for a loan with a hard money lender, however, it’s important to first understand the industry’s core principles. Once you have a clear understanding of hard money financing, the next step is to find the right hard money lender and program for your objectives.


  1. First, acquire a thorough understanding of hard money lending core principles.

    The Bay Mountain Capital website is an excellent resource to help you. Using our site, you can learn how hard money lenders determine their terms:

  • Hard money loans are based on the completed value, including proposed improvements (instead of personal income and finances)
  • The advantages to borrowing hard money (easy to obtain and quick to close)
  • The cost of a hard money loan, including interest rates and fees
  • The purposes of hard money financing – including acquisition and renovation, bridge to a refinance or sale, or cash out on an investment property
  • How to “buy right” by understanding key drivers to help you acquire under-valued real estate
  • Ways to perform due diligence to increase your confidence and help you bring more capital to your purchase
  • The importance of aligning capital to ensure success for the borrower, equity investor and lender
  • The importance of structuring each transaction with a proper balance of debt and equity capital
  • Good and well-executed business plans
  • Additional steps and limited documentation needed by the lender following application
  • The potential risks of hard money lending


  1. Determine if you can meet and accept the lender’s criteria by answering the following:

  • Is my property located in a city that is approved by the lending company?
  • Have I made a smart real estate decision due to knowledge and information gathered from property managers, real estate agents, and other experts, and from walking the property and driving the surrounding neighborhoods?
  • Does the lender fund my type of property?
  • Does the business plan make sound financial sense (for example, all expected property-related and financing costs)?
  • Will the property appraise for the necessary value?
  • How much equity do I need to have in the property and where will it come from?
  • Do I have a good business plan that reflects a strong understanding of the local market?
  • Have I underwritten all the possible risks and outcomes that are reasonably possible?
  • Do I have sufficient capital reserves to repay my loan according to its terms and minimize the potential for default?
  • Have I accounted for the unexpected such as construction delays, extra repairs, or an economic downturn?
  • Will I be able to provide my equity investors an acceptable return given the risks?


Taking the time to educate yourself on the mechanics and benefits of hard money financing, followed by proper underwriting using applicable hard money terms and requirements, can set the stage for a successful real estate investment.

You can complete an application at here.  Afterward, you will receive a preliminary loan estimate and learn of additional steps and limited additional information that will be needed.


This article was originally published on Nov. 29, 2017 and is updated as of Oct. 26, 2022.

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