Hard money.
What it actually means.

What it is

Hard money is short-term financing from private lenders and funds that underwrite the property rather than the borrower. Because the collateral is the whole thesis, approval turns on the deal — purchase price, rehab scope, and after-repair value — instead of tax returns and debt-to-income. That is what makes it fast, often closing in one to two weeks, and what makes it expensive. It exists to solve a timing problem: distressed properties are bought in conditions and on schedules that conventional lenders will not touch.

How it is priced

Expect a rate roughly in the 9–13% range plus 1–3 points charged at closing, structured interest-only over a six-to-eighteen-month term. A $120,000 balance at 11% costs about $1,100 a month in interest, and two points adds about $2,400 up front. Many lenders size the loan against after-repair value rather than purchase price and fund rehab in draws reimbursed as work is inspected and completed — which means you front each stage of the renovation and get paid back, a working-capital requirement that surprises first-time users.

Monthly interest-only payment = loan balance × annual rate ÷ 12. A $120,000 draw at 11% costs about $1,100 a month, plus 2 points ($2,400) charged up front.

How investors actually use it

As a bridge, never as a destination. The standard pattern is to buy and renovate on hard money, then exit — selling the finished flip, or refinancing into a long-term rental loan once the property is stabilized and the value has been forced up. The cost is tolerable precisely because the clock is short, so the whole plan lives or dies on the exit being real: a confirmed sale price supported by comparable sales, or a refinance a lender will actually fund at the coverage and loan-to-value available at that time.

The common mistake

Budgeting the interest but not the calendar. Points and monthly interest are easy to model; the overrun is not. A renovation that runs three months long adds those months of interest, taxes, insurance, and utilities directly to your basis, and it consumes the term you have to exit in. Investors who use hard money well underwrite a longer hold than they expect, confirm the takeout financing before closing, and keep reserves to cover payments in a market where the exit takes longer than planned. Most lenders will extend a term for a fee, which is far cheaper than a forced sale but is rarely modeled at the outset.