Four Must-Know Hard Money Lending Products
For real estate investors, hard money loans are a flexible, fast option tailored to various strategies. Here’s an overview of four popular solutions:
Fix-and-Flip Loan
This short-term loan is great for investors renovating and reselling properties. It covers both purchase and rehab costs when adding value for a profitable sale. If you're a BRRRR investor (Buy, Rehab, Rent, Refinance, Repeat), this is the product for your “Buy and Rehab” stage. While it’s called a “Flip” loan, selling the property isn’t required, you just need to exit the loan as agreed, through either a sale or a refinance.
Bridge Loan
Bridge loans provide fast, flexible funds for investors needing to transition quickly between deals or cash out on property equity. These loans often require less formality than long-term loans and can be used for a variety of needs, from funding a new purchase to temporary cash flow. Unlike Fix-and-Flip loans, bridge loans may not require renovation draws, giving you quick access to funds upfront.
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New Construction Loan
Designed for ground-up builds, this loan covers costs from land acquisition to project completion. A key qualifier is having approved plans. This is important to remember as some county approvals can be time-consuming. Given their higher rates, it’s best to wait on New Construction loans until permits are ready, so you’re not paying interest before you can start building.
DSCR Loan
The DSCR (Debt Service Coverage Ratio) loan is based on a property’s income potential rather than your personal income. It’s ideal for rental properties generating consistent cash flow. Key criteria include your credit score, the property’s income, and costs like taxes, insurance, and the mortgage. Understanding these factors can help determine if DSCR financing is right for you.
Hard money loans are tailored to investor needs and offer quick closes, often with no prepayment penalties for Fix-and-Flip, Bridge, and New Construction loans. This gives you flexibility to exit early without added costs—ideal for keeping holding costs low and staying competitive in today's market.