Guide
Exit strategies: how the loan ends
Every hard money loan is a bet on a specific exit happening by a specific date. Choosing it before you borrow is the whole discipline.
There are three exits and one non-exit. Know which one you are underwriting to, and know what it depends on.
Exit 1: sell
The default for a flip. Depends on the ARV holding and on days-on-market being what you assumed. Both are market variables you do not control.
- Build marketing time into the hold, not just renovation time. A 5-month rehab is an 8-month loan in practice.
- Check current days-on-market for finished comparable properties in that specific submarket, not the metro average.
- Model the break-even resale price, not just the ARV. The true-cost calculator computes it.
Exit 2: refinance into long-term debt
The BRRRR exit. Depends on three things, any of which can kill it:
- The appraisal supporting the value you need at the LTV the lender offers.
- The DSCR clearing the threshold, usually 1.20, at the rent the property actually achieves.
- Seasoning - many lenders will not use the new value until you have owned it six months, so the refinance cannot happen the day the rehab finishes.
Exit 3: pay off from other capital
A sale elsewhere, a maturing investment, a partner contribution. Legitimate and the least risky, provided the capital is actually committed rather than expected.
The non-exit: extend and hope
Underwriting the exit before you borrow
- Write down the exit, the date, and the number it depends on.
- Test that number 10% worse. If the deal fails, you have a single-point-of-failure structure.
- For a refinance exit, get a rental lender to look at the file before you close on the bridge. A DSCR lender's soft pre-approval costs nothing and prices the risk properly.
- For a sale exit, identify the three comparable properties you are relying on and check what they actually closed at and how long they took.
- Have a second exit. Not a plan, a second exit - a rent-it-out floor under a flip, or a sale price under a refinance.
Questions people actually ask
How much do you put down on a hard money loan?
Against as-is value, lenders typically go to 60% to 75%, so 25%-40% comes from you. On a purchase with rehab the more common framing is loan-to-cost: 80%-90% of the purchase price plus 100% of the rehab budget, held back and released in draws.
Do not confuse the down payment with cash to close. Points, flat fees, title, insurance and the first draw you fund yourself all sit on top. Ten to fifteen percent of purchase price is a realistic planning figure for total cash needed on a leveraged flip.
How much down do you need for a hard money loan?
See above - 10% to 20% of purchase is the usual range, before fees and reserves.
Does a hard money lender cover 100%?
Almost never on purchase price, and the offers advertising it usually mean something narrower: 100% of the rehab budget (common and real), or 100% of purchase where the purchase is far below as-is value and the loan is still inside the lender's ARV cap (rare and deal-specific), or 100% with cross-collateralisation against another property you own (real, and it puts a second asset at risk).
Treat a headline promising 100% financing with no cash as the marketing hook it usually is, and read what the offer actually caps at. See the truth about 100% financing.
How long do you have to pay off a hard money loan?
Terms run 6 to 24 months, with 12 months the most common. That is a hard deadline with a fee attached, not a guideline - which is why the exit matters more than the rate.
How do you pay back a hard money loan?
Three ways, and you should know which one before you sign. Sell the property and pay off from proceeds. Refinance into longer-term debt, usually a DSCR rental loan. Or pay it off from other capital. Most hard money loans are interest-only during the term with the principal due as a balloon at the end, so there is no amortisation quietly reducing what you owe.
Can I get a hard money loan for the BRRRR method?
Yes, and it is one of the two main uses of the product. The hard money loan funds the buy and the rehab; the refinance into a long-term rental loan is the exit that repays it. The whole strategy lives or dies on that refinance, so the question to answer before you borrow is not whether you can get the hard money - it is whether the refinance will appraise and cash-flow.
Can hard money loans be refinanced?
Yes - that is the intended exit for any buy-and-hold deal. The refinance is normally into a DSCR rental loan, which qualifies on the property's rent rather than your income.
Two traps. Seasoning: many lenders will not lend against the new appraised value until you have owned the property for a set period, commonly six months; refinance before that and you may be capped at your purchase price plus documented rehab instead. Timing: if your hard money term is 12 months and your seasoning is 6, you have a narrow window, and appraisal delays eat it fast.