Hard money loans are expensive. 10-15% interest. 2-4 points upfront. Short terms.
But sometimes they're the right tool for the deal.
Better Offers Inc (CA DRE #01212512) is a California mortgage broker that compares hard-money and bridge-financing options. Here's when they may work -- and when they may not.
What Is a Hard Money Loan?
Hard money = short-term loan from a private lender secured by real estate. Qualification is based on property value, not your credit or income. Approval takes 3-7 days. Terms run 6-24 months. Rates and fees are higher than bank loans.
Typical Terms (California 2026)
Interest rate: 9-15% | Points: 2-4 upfront | LTV: 60-75% of purchase or ARV | Term: 6-24 months
Example: Buy at $400K, repairs $100K, ARV $600K. Hard money loan at 70% of purchase = $280K. Rate: 12% + 3 points. Points cost: $8,400. Monthly interest: $2,800. 12-month hold = $33,600 + $8,400 = $42K to borrow $280K for a year. Expensive, but if the deal works, it's worth it.
When Hard Money Makes Sense
Fix-and-flip. Banks won't lend on properties needing major repairs. You need to close fast and hold short -- high interest doesn't compound too long on a 6-12 month timeline.
Get a Fix-and-Flip Quote
Compare investor loan options for purchase, rehab, and short-term bridge funding.
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Bridge financing. You found the right property but can't close on conventional fast enough. Use hard money to close, then refinance to conventional or DSCR within 6-12 months.
Properties banks won't touch. Foundation issues, fire damage, code violations, distressed/REO properties. Hard money lenders care about ARV, not current condition.
Speed deals. Foreclosure auctions, probate sales, off-market listings where the seller wants to close in 7 days. Hard money can do it. Banks can't.
Credit or income issues. Your credit is 580 and you're self-employed with messy tax returns. Banks say no. Hard money lenders care about the property, not you.
Broker's Tip: Hard money is a tool, not a long-term financing plan. Always have an exit strategy before you borrow.
When Hard Money Doesn't Make Sense
- You plan to hold long-term. Don't pay 12% for 10 years. Refinance into permanent financing.
- The deal is marginal. If your profit is thin, hard money costs will eat it.
- You can qualify for conventional or DSCR. If you can get 7% bank money, don't pay 12%.
- You don't have an exit strategy. If you can't refi or sell when the loan matures, you lose the property.
Hard Money vs. Other Options
| Loan Type | Rate | Term | Speed | Use Case |
|---|---|---|---|---|
| Hard Money | 10-15% | 6-24 mo | 3-7 days | Fix-flip, bridge |
| DSCR | 7-8% | 30 years | 30 days | Buy-hold rentals |
| Conventional | 6.75-7.25% | 30 years | 30-45 days | Standard purchases |
What Hard Money Lenders Look For
The deal -- is the ARV realistic? Your experience -- have you flipped before? Exit strategy -- how will you pay off the loan? Skin in the game -- do you have cash invested? The property -- location, condition, resale potential.
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Exit Strategies
Plan A: Sell. Renovate, list, sell, pay off hard money from proceeds. Plan B: Refinance. Rehab done, property rented, refi to DSCR or conventional. Plan C: Private sale. Sell to another investor before the loan matures.
Never enter a hard money deal without at least 2 exit strategies.
Illustrative Riverside Flip Scenario
Assume a distressed single-family home costs $350,000, repairs cost $80,000, and the projected after-repair value is $530,000. A hypothetical hard-money loan at 70% of purchase would be $245,000 at an assumed 11% plus 3 points. If the property later sold for $520,000 after a nine-month hold, the estimated return would depend on actual financing, carrying costs, commissions, closing costs, repairs, taxes, and the final sale price. Actual results vary.
California-Specific Notes
Usury laws have exemptions for real estate secured loans made by licensed brokers and lenders -- most hard money operates under these. Foreclosure is non-judicial in California; if you default, the lender can foreclose without court in 90-120 days. High property values in coastal markets mean points and interest add up fast on $500K-$1M+ flip loans.
Find the Right Hard Money Lender
We work with reputable California hard money lenders for fix-and-flip and bridge financing.
Better Offers Inc | CA DRE #01212512