Hard Money Loan
Quick Answer
Asset-based short-term lending secured by real property, typically used by investors who need fast financing without traditional income verification.
Definition
A hard money loan is an asset-based short-term loan secured by real estate. Unlike conventional mortgages, hard money loans are underwritten primarily on the value and exit strategy of the property rather than the borrower's income, tax returns, or W-2s. They are typically provided by private lenders, funds, or specialty finance companies. Hard money loans close faster than conventional loans and are the primary financing vehicle for house flippers, bridge buyers, and real estate investors.
Why It Matters for Flippers
Hard money lending provides an alternative for business-purpose investment projects. Pricing, approval and closing depend on the borrower, property, leverage and complete documentation. Shorter terms require a documented exit strategy; neither approval nor funding is guaranteed.
Example in a Flip Deal
Illustrative only: an investor purchases a property for $165,000, proposes a $50,000 renovation budget and plans to sell for $295,000. Financing and draw releases require underwriting and verification; these figures are not a completed transaction or a promised outcome.
Related Terms
Fix and Flip Loan
A short-term real estate loan designed for investors who buy, renovate, and resell properties for profit.
Private Lender
A non-bank lender — typically a fund, specialty finance company, or individual — that provides real estate loans based on property value rather than borrower income.
Bridge Loan
Short-term financing used to 'bridge' the gap between buying a new property and selling or refinancing an existing one.
LTV (Loan-to-Value)
The ratio of the loan amount to the appraised value of the property, expressed as a percentage.
ARV (After Repair Value)
The estimated market value of a property after all planned renovations are complete.