Hard Money Loans in California: When They Make Sense

Hard money loans are expensive. 10-15% interest. 2-4 points upfront. Short terms.

But sometimes they're the right tool for the deal.

I'm Bill McCoy (CA DRE #01212512). I've used hard money on my own deals and helped clients structure them. Here's when they work -- and when they don't.

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.

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.

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.

Real-World Example: Riverside Flip

Buy distressed SFR at $350K. Repairs: $80K. ARV: $530K. Hard money at 70% of purchase = $245K at 11% + 3 points. Cash invested: $185K. Total carry costs over 9 months: $33,563. Sold for $520K. After commissions, closing costs, and payoff: $33,437 profit -- 18% ROI in 9 months.

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.

Get Connected with Lenders

Better Offers Inc | CA DRE #01212512