In this instructional video, seasoned real‑estate professional Joe Homs outlines the four critical factors that fix‑and‑flip investors need to understand before taking a hard‑money loan. He explains that hard‑money loans have much shorter terms and higher interest rates (typically 8‑16%) than conventional mortgages, and that lenders expect the loan to be repaid quickly from the sale of the renovated property. He highlights the rapid turnaround of hard‑money financing—often same‑day approval and fast fund disbursement—emphasizing that lenders focus on the property’s potential rather than the borrower’s credit score. He notes that most hard‑money lenders cap loans at about 90% of the purchase price and require the borrower to have significant “skin in the game,” usually a 30% equity stake, with experienced flippers often reserving 10‑15% of the budget for unexpected repairs. Finally, he warns against common profit‑draining mistakes such as over‑estimating the after‑repair value, adding premium upgrades that buyers won’t pay for, and missing project timelines. He advises investors to research lenders carefully and offers additional resources for successful flipping.
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In today's video, we're going to talk about 4 things that you must know before getting a hard money loan. Coming up next. A major challenge for fix and flip investors is securing financing for their project. The majority of fix and flip investors rely on hard money loans to complete their project. But before you go out to secure your financing, here are 4 things you must know. I'm Joe, If you are a new or experienced investor, this channel is for you. I have over 40 years of experience as a broker, investor, and mentor. If you want to create the life you've always wanted through real estate, make sure you subscribe. The first thing you need to know is that hard money loans have shorter terms and higher rates than traditional mortgages. The terms on hard money loans. vary from one lender to the next. Hard money lenders anticipate that the rehabber or flipper can complete the project before the loan comes due. Then they use the sale proceeds to pay back the loan. The loans are structured that the monthly interest payments are made during the rehab, and then the principal becomes due after the home is sold. Because of the shorter terms, Hard money loans typically have higher interest rates ranging from 8% to 16%. The second thing you must know is faster turnaround provides a major advantage when compared to conventional financing. Hard money loans have a greater advantage that you have quicker access to the capital. Hard money loans are processed quickly. Some lenders may even provide you same-day loan approval. Funds are also disbursed rapidly. Sometimes days from the approval. Another advantage of a hard money loan is that they focus on the property or the deal itself, and not so much on the individual person. A rehabber with proven skills seeking to finance a property may still qualify for hard money despite having less than stellar credit scores. Third thing you must know is that hard money loans are typically capped at 90% of the purchase price. And the last thing you need to know is lenders want borrowers to have skin in the game. Hard money lenders often require borrowers to retain a good financial stake in the project. Some hard money lenders may require the rehabber to invest at least 30% of their proceeds into the deal. Most professional flippers rely on business credit to make up that difference. Experienced flippers usually set aside 10 to 15% for unforeseen repairs. Other common rehabber mistakes that can really cut into your profits are: 1, overestimating the after-repair value; 2, putting in some premium items that the potential buyer is not willing to pay for; and 3, going over your timeline. There are many hard money lenders to choose from. Before applying for a loan, rehabbers should research the best lenders that fit their needs. If you want to know more about flipping, then click this video right here. I'll point out how to make the most of your next project. As always, feel free to reach out anytime. I'm here to help.
