Guides
Twenty guides to how hard money actually works - written for people who are about to sign something, not for people idly searching a definition.
If you read three, read how to read a term sheet, interest on the undrawn holdback and the worked example. Between them they contain most of what separates a loan that costs what you expected from one that does not.
Start here
How a hard money loan actually works
The mechanics of asset-based real estate lending: who lends, what they underwrite, how the money is released, and what happens when the term runs out.
Start hereAre hard money loans dangerous?
A straight answer, with the securitization data that shows exactly where the risk sits - and it is not where most people look.
Start here
Cost mechanics
The four pages that make up the argument this site exists to make.
How to read a hard money term sheet
A line-by-line walkthrough of what a hard money term sheet says, what it means, and the twelve questions that decide what the loan actually costs you.
Cost mechanicsThe fee stack, line by line
There are usually nine fees on a hard money loan. A term sheet typically names two. Here is the complete list, what each one should cost, and which are negotiable.
Cost mechanicsThe most expensive word on your term sheet
Whether interest accrues on the full loan or only on the money you have actually drawn is the biggest cost difference between two lenders quoting the same rate. Here is the arithmetic.
Cost mechanicsMinimum interest: paying for months you do not use
A guaranteed-interest clause means you owe interest whether or not the loan is outstanding. On a fast project it can be the single largest cost in the deal.
Cost mechanics
Rules of thumb
Qualifying
What lenders actually require, and what it costs you when you fall short.
What a hard money lender actually requires
The real checklist, in the order the lender weighs it - which is not the order a bank would.
QualifyingHow much cash you actually need
The down payment is roughly a third of what a leveraged flip requires in real cash. Here is the full list, with a worked total.
QualifyingThe truth about 100% financing
"100% financing" and "no money down" are real offers that mean something much narrower than they sound. Here is what each version actually is.
QualifyingBad credit and your first deal
Credit matters less here than anywhere else in lending. It still costs you - just in leverage and price rather than in a decline.
Qualifying"No credit check" hard money lenders
They exist, the phrase means three different things, and it is also the single most common line in advance-fee loan fraud. Here is how to tell the versions apart.
QualifyingExperience tiers: how lenders price your track record
Completed deals move your leverage and pricing more than your credit score does. Here is how the tiers usually work and what counts.
QualifyingOut-of-state, remote and foreign-national borrowers
Remote online notarisation, foreign-qualifying an entity, and what a lender needs when you are not in the country the property is in.
Qualifying
Underwriting
Running the loan
Draws, timing, and what happens when the project runs long.
How draws actually work
The rehab holdback is released against completed work. The timing of that process decides how much of your own cash you have to float, and for how long.
Running the loanExtensions, running late, and default
Most projects run past the term. What happens next is written in the note, and it is worth reading before you need it.
Running the loan
Getting out
The exit is the part you underwrite first and everyone underwrites last.
The paperwork
Guarantees, liens and negotiation.
Personal guarantees and recourse
Your LLC is the borrower. You are almost always the guarantor. That distinction matters enormously if the deal goes wrong.
The paperworkConfession of judgment: signing away your day in court
A COJ lets a lender obtain judgment against you without a hearing, without notice, and without you getting to argue. Federally banned in consumer credit - and still legal in business lending in several states.
The paperworkPartial release: getting one property out of a loan
If a loan is secured by more than one parcel, the partial release clause decides whether you can ever sell one of them without repaying everything.
The paperworkCross-collateralisation
Pledging a second property to support the loan can unlock leverage you could not otherwise get. It also links two assets so that one failing can take the other.
The paperworkNegotiating your terms
What actually moves on a hard money term sheet, what never moves, and the order to ask in.
The paperwork