What is hard money used for?

A: Hard money is generally used as a bridge to allow the borrower or property to be brought into compliance with conventional financing guidelines or sold. It is generally a short to medium term solution (1-5 years) and it is used for all types of real estate: commercial, retail, office, industrial, raw land, construction, land development, multi-family, single family homes and manufactured homes.

Q: Why would anyone borrow hard money when banks charge lower interest and less fees?

A: There are many reasons why a borrower would choose to use private or hard money over less expensive institutional financing, but the following will address the most common uses. Speed of funding is the most common reason -- banks typically take a minimum of 45 days to fund a residential loan, 60-90 days to fund a commercial loan, and 120 or more days to fund a construction or development loan. Private money, however, is typically funded within two weeks, and can be funded as quickly as 24 hours in certain cases. Another type of project suitable for private money is a property that either lacks cash flow to meet bank requirements or requires physical improvements. Banks will not typically fund a loan secured by a property that requires rehabilitation prior to its use, and thus the borrower will obtain a private money loan to purchase and rehab the property, and then payoff the private money loan with conventional financing. Sometimes a borrower will purchase a commercial property that has no tenants. Banks will not loan on such properties but private money will provide a bridge loan to purchase the property and provide the borrower with time to lease up the property. Once the leases are in place and have been