5 Reasons You May Need a Hard Money Loan
6 minute read
January 8, 2024


Hard money loans are essential tools for real estate investors, allowing them to access the cash they need quickly and with greater flexibility.

This is because a hard money loan is secured by the property, rather than the borrower’s finances.

If you’re interested in more flexible financing options for your properties, let’s take a look at what hard money is, and the five reasons you might need to turn to a hard money loan for your investments.

What is a hard money loan?

Hard money loans are funded by private investors or companies rather than traditional banks or financial institutions.

The key characteristic of a hard money loan is that it is secured by the value of a tangible asset, such as an investment property, rather than the borrower’s creditworthiness.

Hard money loans are commonly short-term loans that cover quick financing needs, such as house flipping, new construction, or purchasing property quickly.

However, hard money loans also have long-term options for rental properties, such as debt service coverage ratio (DSCR) loans.

Hard money lenders meet the unique needs of investors because they understand these types of deals, and have the experience to quickly evaluate and fund them.

Let’s dig into the five reasons you might need to turn to a hard money loan.

1. Fast access to funds

Hard money loans are perfect for providing quick access to funds for time-sensitive opportunities.

One type of hard money loan that is perfectly suited for this purpose is a bridge loan.

Bridge loans most commonly “bridge the gap” between the sale of one property and the purchase of another. 

Essentially, they cover the time between when you need funds now and when you will be able to secure a source of permanent financing to cover the costs.

Examples of time-sensitive opportunities include real estate auctions, competitive markets, or excellent deals that won’t be on the market long.

Bridge loans often close in three to five days, with six to 18-month terms. 

This allows an investor the time they need to purchase a property and secure permanent financing for it through the sale of another property or a different type of loan.

2. Asset-based lending

Hard money lenders are focused on the value of the property, which means you can expect an overall more streamlined and efficient lending process.

Traditional loans must follow strict requirements that rely heavily on a borrower’s income, employment, credit, and debt.

This can make it more difficult for many types of borrowers to easily qualify, including real estate investors and self-employed individuals whose tax returns do not accurately reflect their true income.

If you’re having trouble qualifying for other types of financing, you may need to turn to hard money lending.

Hard money lenders have the knowledge and experience to quickly evaluate the merits of your investment deal based mainly on the value of the property you want to purchase, your recent bank statements, and your investment plan and exit strategy.

While your credit score isn’t the biggest factor to a hard money lender, they still will want to review your credit as an indicator of your overall financial health and ability to repay your loan.

Start your next investment with Park Place Finance

3. Flexible loan terms

A hard money loan’s flexibility extends to loan amounts, term lengths, payment structures, and project-specific considerations.

Essentially, hard money loans can adapt to the unique needs of each real estate project.

Whether it’s a fix-and-flip or a longer-term investment strategy, borrowers can work with lenders to structure terms that align with their investment goals.

This might include larger loan amounts, interest-only payments, a range of property types, or the freedom to prepay with no penalty.

Flexible loan terms also may allow borrowers to align the repayment schedule with their chosen exit strategy, ensuring a smooth transition once the investment objectives are achieved.

4. Construction or rehab financing

Let’s face it, it’s not easy to qualify for traditional construction or rehab loans—especially if you are navigating multiple projects and loans at a time.

This is the reality of successful investors, but traditional loans often limit access to funding for a certain number of properties and loan amounts, in addition to a borrower’s income, credit, debt, and other factors.

If you can make it through your financial approval, you then have to navigate strict project requirements.

If this has been your experience with construction or rehab financing in the past, consider hard money loans to finance these types of projects.

Hard money construction loans and fix-and-flip loans cover the costs of purchasing the land or structure and the costs to build or renovate, respectively.

Park Place Finance construction loans can be used for ground-up, new construction or to renovate a mid-construction project.

Our fix-and-flip loans give investors the option to purchase and rehab, refinance and rehab, buy and flip, or buy and hold—whether you have flipped hundreds of homes or this is your first property.

5. Unique investor scenarios

Distressed properties, unique properties with distinctive features, or historical properties that cannot be approved by traditional lenders may have a chance with hard money lenders.

On a more personal level, those with limited credit history or experience, those who are self-employed, or those with a history of foreclosure or bankruptcy also should discuss their unique scenario with a hard money lender to determine their options.

With hard money lending, it’s always worth it to call and explain your scenario—even if you aren’t sure if your deal will get approved.

The experts at Park Place Finance can help you navigate your options and offer suggestions and support for your next steps.

Start the loan process with Park Place Finance

Park Place Finance is a direct hard money lender with in-house capital—and over $1 billion in loans funded nationwide since 2006.

We are your trusted hard money lender, and we pride ourselves on providing you with a personalized and efficient lending experience from start to finish. Start here to share some basic details about the financing you’re looking for, or call us at (866) 407-1599 to speak with an account executive now about your unique loan scenario.

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