A hard money loan is a short-term, asset-based loan secured by real property. The lender evaluates the deal — the property value and your exit strategy — rather than primarily your income and credit history. Typical terms: 6–18 months, 10–13% interest, 2–4 points, 65–75% LTV or LTC.
On a $200k purchase with $50k rehab: a hard money lender at 70% LTC lends $175k (70% of $250k total cost). You bring $75k to closing. During rehab, draws are released as work is completed and inspected. At sale, the loan is repaid from proceeds.
Points are upfront fees — 2 points on a $200k loan is $4,000 due at closing. Factor these into your deal analysis. A deal that works at 1 point may not work at 3 points. Always model the full financing cost.
Local real estate investor meetups are the best source. Online directories, BiggerPockets, and referrals from title companies also work. Avoid lenders who charge large upfront fees before funding — legitimate hard money lenders charge points at closing, not before.
Hard money closes in 7–14 days vs 30–45 for conventional. It costs more (10–13% vs 6–8%) but the speed and deal-based qualification make it the right tool for acquisitions. Never use hard money for long-term holds — refinance into permanent financing at stabilization.
Dan White is a licensed Virginia real estate agent at Pearson Smith Realty and founder of FreeDealCalc.com. He has used hard money loans on dozens of flips across Northern Virginia.