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How to Expand Your Next Real Estate Investment Using a Hard Money Loan

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A hard money Loan lender shaking hands with a property investor - ECF

Real estate is generally deemed to be a safe investment in that the relative price volatility in this sector is typically less in comparison to the stock market. Historically, data indicates that property prices trend upwards when economic conditions are expected to improve. Major crises including the current pandemic or significant periods of recession can prompt a temporary drop in prices. These downward trends can offer a substantial opportunity for first-time home buyers and those looking to enter the investment property space.

Pricing Factors

The general area and specific location are the determinative factors that influence whether a given property is considered hot or not. The targeted property type is also an important aspect of residential, industrial or commercial property, and undeveloped land. Additional property characteristics to consider are connectivity (i.e., water/sewer, electricity, utilities, etc.), interest rates, economic conditions, and the current demand and supply in the real estate marketplace. There are also multiple options available to aspiring real estate investors in terms of how they want to go about managing their portfolios; whether that be assuming the role of landlord and enjoying the passive revenue stream from rental income, investing in a real estate investment trust (REIT) or attempting to fix and flip, and sell a property.

Using Hard Money Loans to Diversify Your Investment Portfolio 

No matter whether you go with the REIT, rental property, or property fix and flipping strategy, you can leverage the distinct advantages of hard money loans in New York to expand and diversify your investment portfolio, which will subsequently enhance your bottom line.

Hard money is essentially an unconditional type of financing for getting your real estate transaction fully funded without having to go through the qualification process associated with a traditional mortgage. Traditional financing procedures can take a significant period of time, a commodity often in short supply for private investors looking to capitalize on last-minute property purchases at premium price points.

In the majority of situations, the eligibility consideration for hard money lenders is focused on the merits and potential profitability of the deal at hand and not the borrower’s personal financial profile. disregarding factors such as a poor credit score. Individual Investors should keep in mind the associated costs of obtaining a loan and how it will ultimately impact your return on investment. There are a few fees associated with hard money loans to be aware of, including:

Interest: Hard money loans are interest-only loans that usually range between 8-12% depending on the loan amount and the specifics of how the transaction is funded.

Points: Private lenders will usually charge points for availing the loan, with one point equating to 1% of the total loan amount.

Extension fees: These are charged in instances where the duration of the short term loan is extended, however, when partnering with Express Capital Financing, you will receive a free extension.

Other fees: These include costs related to inspections, processing, applications, etc.

Real estate investors should shop around and compare multiple alternative financing options to find the right fit for them in terms of cost and the ability to tailor a loan package that corresponds with your investment strategy.

The vast majority of hard money lenders are willing to lend up to 70%, which is a loan to value (LTV) of after repair value (ARV) for residential property flipping projects. For other types of projects, loan to construction (LTC) packages can range from 80-90%, which encompasses the acquisition expense and repair costs. This means that you can flip a property with minimal (10-15% of the project value) out-of-pocket expenses, which gives you ample opportunity to take on multiple projects using hard money loans and vastly expand your real estate investment portfolio. The more projects and properties you are drawing income from, the more your overall profit margin will increase.

Are there risks associated with hard money loans?

While a hard money loan can be an excellent way for investors to raise capital when compared to conventional loans, it does come with some risks. These include:

  • Market Fluctuations: If the real estate market experiences a downturn, it could affect the borrower’s ability to repay the loan or sell the property at a profit.
  • Lack of Flexibility: Hard money lenders are primarily concerned with the value of the property and the borrower’s ability to repay the loan. They may be less willing to work with borrowers who face financial difficulties.
  • Credit Score is Less Important: While this might seem like an advantage, it can also be a risk. Without the typical credit checks and assessments, such as a review of tax returns and credit history, borrowers might take on more debt than they can realistically manage.
  • Limited Loan-to-Value (LTV) Ratios: Hard money lenders usually lend a percentage of the property’s value (LTV), which is typically lower than what a traditional lender might cover. This means borrowers may need to come up with a larger down payment.
  • High Interest Rates: These types of loans typically come with much higher interest rates compared to traditional loans. This can lead to significant costs over the life of the loan.

It’s crucial for borrowers to thoroughly evaluate the risks and benefits of hard money loans and consider their financial situation, investment strategy, and exit plan before taking out such a loan. Additionally, working with a reputable and experienced hard money lender can help mitigate some of these risks.

If you are looking to partner with a hard money lender, reach out to Express Capital Financing today. We offer competitive rates and have over 30+ years in the industry.


Qualifying for a hard money loan is typically easier than qualifying for a traditional bank loan because hard money lenders primarily consider the value of the collateral (usually real estate) rather than the borrower's credit report or financial profile.

A hard money loan is a short-term loan typically used by real estate investors to purchase, renovate, or refinance investment properties. These loans are often used when traditional financing options are unavailable or when the borrower needs quick access to capital. These can have a shorter repayment period or be extended if approved by the lender.

A bridge loan, on the other hand, is a short-term loan used to bridge a financial gap or provide temporary financing until a long-term solution can be arranged. Bridge loans are often used in real estate to cover the time gap between the purchase of a new property and the sale of an existing one.

Traditional Mortgage Loans: Traditional real estate loans, whether fixed-rate or adjustable-rate, are the most common way to finance the purchase of a home. They typically offer lower interest rates and longer repayment terms compared to hard money loans. However, conventional financing has more stringent qualification requirements, including having no credit issues and a stable source of income.

Private Money Lenders: Private individuals or entities can provide financing for real estate investments. While private lenders may have more flexible terms than traditional lenders, they often have less stringent requirements than hard money lenders. The repayment terms can vary based on the negotiation with the lender.

Fix-and-Flip Loans: Some lenders specialize in providing loans specifically for fix-and-flip real estate projects. These may have more flexible loan terms more favorable than traditional hard money loans, and they are designed for short-term renovation and resale projects.

Hard Equity Loans: Hard equity loans, also known as asset-based loans, are similar to hard money loans but can have slightly more favorable loan terms. They are typically used by real estate investors and business owners who have substantial equity in their properties or assets.

To help with all of these questions and more, we've put together this handy guide on evaluating fix and flip properties.

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