Choosing the right hard money lender for your investment project can be tricky. In my 28-year career in real estate and investing, I have had to source hard money financing for everything from simple fix-and-flip properties to multi-million-dollar apartment building rehabs.
In this article, I’ll cover the basics of hard money loans, how to choose the hard money lender that’s right for you, how to get approved for financing, and much more. If you’re not sure why and when you should consider a hard money loan, jump down to our primer to learn more. But if you’re ready to find the right partner for your project, let’s dive in.
The Best Hard Money Lenders
| Hard Money Lender | Best For |
|---|---|
| Kiavi | Best overall for all loan products |
| RCN Capital | Best hard money lender for fix & flips |
| Lima One Capital | Best for new investors |
| Groundfloor | Lowest interest rates |
| The Investor’s Edge | Best hard money lender that doesn’t require a down payment |
| New Silver | Best for streamlined loan application and approval |
Kiavi: Best Overall Hard Money Lender
Why I Recommend Kiavi
Finding hard money financing for long-term, buy-and-hold properties can be challenging. The good news is that Kiavi specializes in just that: hard money loans for rental properties. This is why I chose Kiavi as the best hard money lender for investment properties on this list.
Their rental loans are more similar to conventional than fix-and-flip funding. For rental loans, Kiavi uses the anticipated rental income from the property to help you qualify for the mortgage. This allows even a low-income or self-employed borrower to build an investment portfolio. Rental loans look like traditional loans and are available for single-family homes, duplexes, and multifamily properties of up to four units. Rental loans are cheaper than fix-and-flip loans, with interest rates starting at 7.5% and a loan term of 10 to 30 years, including a three-year prepayment penalty.
Like the hard money lenders on this list, Kiavi also offers a fix-and-flip loan with a 12- to 24-month term starting at 10% (interest only). You will need a minimum credit score of 650 and to be prepared to pay between 2 and 3 points as an origination fee. This is typical for most hard money fix-and-flip loans.
Be aware that the high interest rate market is causing lenders to constantly update their loan products.
Kiavi Rates & Terms: Fix & Flip (2023)
| Interest Rate | 10% to 12% interest only |
| Loan-to-Value Ratio (or LTV) | 90 % LTC (loan-to-cost) Up to 100% of rehab costs 75% ARV (after-repair value) |
| Upfront Fees | No upfront fees, but there is a 2% to 3% origination fee |
| Term | 12 to 24 months |
| Credit Requirement | 650 FICO, no hard credit pull |
| Investing Experience | Past mortgage required |
| Min & Max Loan Amount | $75,000 - $2.5 million |
| Prepayment Penalty | Yes |
| Property Types | Single-family homes, attached and detached planned unit developments (PUD), and 2-4 unit rentals |
| Markets | 32 states |
RCN Capital: Best Hard Money Lender for Fix & Flips
Why I Recommend RCN
If you’re looking for a hard money lender that can offer low down payment financing, competitive interest rates, and 100% financing of the renovation costs and fees for your next fix and flip, then look no further than RCN Capital.
RCN Capital will provide financing for up to 90% of the purchase price of your fix-and-flip property plus 100% of the renovation costs up to 67.5% of the property’s after-repair value (ARV). With rates starting at 10.24% for interest-only loans taken out by experienced investors, and up to a 12-month term, this loan is available for all property types, including condos, townhouses, single-family and multifamily homes, and mixed-use properties.
RCN Capital Rates & Terms (2023)
| Interest Rate | 10.24%-10.99% (depending on investing experience) |
| Loan-to-Value Ratio (or LTV) | Up to 90% of purchase price +100% of renovation cost (not to exceed 67.5% of ARV) |
| Term | 12 to 18 months |
| Upfront Fees | 2% to 5% of the loan amount |
| Credit Requirement | 620 minimum credit score |
| Investing Experience | Better terms for experienced investors; investors must already have 2 flips or 2 rentals under their belts |
| Maximum Loan Amount | $7.5 million (up to $10 million for 5+ units and mixed-use) |
| Prepayment Penalty | None |
| Property Types | Condo, townhouse, single-family, duplex, multi-unit, mixed-use; no owner-occupied |
Lima One: Best Hard Money Lender for New Investors
Why I Recommend Lima One
Lima One Capital offers fix-and-flip loans for real estate investors with no flipping experience. They do require inexperienced borrowers to have a minimum credit score of 660. Also the financed property can’t have significant rehab needs, such as structural damage repair.
Starting at 9.6% for fix-and-flip loans, they don’t have the lowest interest rates or fees on our list of hard money lenders. Additionally, their maximum loan amount is limited to 75% of the ARV, which means that you may need to pay for a larger proportion of the repairs out of pocket.
Where Lima One stands out is its willingness to fund and provide in-house construction management support for new investors and its blanket loan coverage for experienced investors.
Lima One Capital Rates & Terms: Fix & Flip (2023)
| Interest Rate | 9.6% to 12% interest only |
| Loan-to-Value Ratio (or LTV) | 92.5% of LTC 75% ARV |
| Term | 13 to 24 months |
| Upfront Fees | 1% to 2.25% of the loan amount |
| Credit Requirement | 620 minimum credit score (660 for inexperienced borrowers); both non-recourse & soft credit pulls available |
| Investing Experience | None required |
| Maximum Loan Amount | $3 million |
| Prepayment Penalty | None |
| Property Types | Townhouse, single-family, multi-unit up to 4.; no owner-occupied |
| Markets | National |
Groundfloor: Best Hard Money Lender for Low Interest Rates
Why I Recommend Groundfloor
Groundfloor is genuinely in a league of its own when it comes to hard money lenders because they use crowdfunding to gather the finances for your purchase. Accredited investors compete to fund your projects, allowing you access to the best interest rates—often up to 2% lower than those offered by other hard money lenders.
Groundfloor also offers fix-and-flip loans for multifamily properties of one to four units in 31 U.S. states. There are no payments during the term of the loans, and they allow you to roll your loan fees into the borrowed amount.
Groundfloor Rates & Terms: Fix & Flip (2023)
| Interest Rate | Starting at 7.5% |
| Loan-to-Value Ratio (or LTV) | 80% to 100% of LTC 70% of ARV |
| Upfront Fees | $495 evaluation fee, 2.75% to 4% origination fee (can be financed), $1,200 doc prep fee |
| Credit Requirement | 640 minimum credit score |
| Investing Experience | No minimum transaction experience required |
| Maximum Loan Amount | $75,000 to $750,000 |
| Prepayment Penalty | None |
| Property Types | New construction, condo, townhome, single-family, multi-units up to 4 |
| Markets | National |
The Investor’s Edge: Best Hard Money Lender With No Down Payment
Why I Recommend The Investor’s Edge
Fix-and-flip financing that covers 100% of your outlay is hard to find. The Investor’s Edge will finance 100% of the purchase price, and in some cases, they will also lend 100% of the repair costs. The variance here depends on what your investment is worth—The Investor’s Edge will finance repairs up to 75% of the property’s ARV.
Another great term is that The Investor’s Edge will waive monthly loan payments and roll them into the final payoff figure. This is a huge advantage for managing cash flow as you fund rehab costs on a project.
What’s the catch? Well, The Investor’s Edge tends to be conservative in terms of maximum loan amount and is more expensive than other hard money lenders. This is why I’d recommend this lender for an investor’s first couple of projects. Those with more experience under their belts may qualify for better rates and terms.
The Investor’s Edge’s 100% loans are even more restrictive. They’re limited to a maximum loan amount of $250,000, so if you’re in an expensive area, these may not work for you. The 100% loan also has higher upfront fees and interest rates than other hard money lenders on this list. However, you won’t have to make monthly payments for up to five months, as the monthly payments can be deferred and rolled into the final payoff statement.
The Investor’s Edge Rates & Terms (2023)
| Interest Rate | 12% to 18% interest only Monthly interest payments can be rolled into final payoff statement |
| Loan-to-Value Ratio (or LTV) | 80 to 100% of LTC 75% of ARV |
| Upfront Fees | $495 evaluation fee, 3% to 5% origination fee (can be financed), $1,200 doc prep fee |
| Credit Requirement | No minimum credit score |
| Investing Experience | No minimum transaction experience required (though this will impact rates) |
| Maximum Loan Amount | $250,000 for 100% loans $1 million for all others |
| Prepayment Penalty | None |
| Property Types | New construction, condo, townhome, single-family, multi-units up to 4 |
New Silver: Best Tech-focused Lender for Easy Application & Approval
Why I Recommend New Silver
New Silver is a new addition to my list as they offer a full hard money loan product suite, together with a streamlined tech platform that includes an easy online application, real-time approval, and immediate term sheet. I like things to be easy.
They offer competitive interest rates, especially to repeat and experienced investors. They’re a little heavy on fees, but they’re all disclosed upfront and don’t show up as a surprise when it’s too late to change lenders.
New Silver Rates & Terms: Fix & Flip (2023)
| Interest Rate | 10% to 12.75% interest only |
| Loan-to-Value Ratio (or LTV) | 90% of LTC 80% of ARV |
| Term | Up to 24 months |
| Upfront Fees | 1.875% to 3% origination fee ($3,500 minimum, can be financed), $759 underwriting fee, $1,250 legal fee, $350 doc prep fee |
| Credit Requirement | 650 minimum credit score; no hard credit pull |
| Investing Experience | No minimum transaction experience required |
| Maximum Loan Amount | $100,000 to $5 million |
| Prepayment Penalty | None |
| Property Types | Residential 1 to 12 units, including single-family, condo and townhomes; multi-family up to 50 units |
| Markets | National |
Methodology: How I Chose the Best Hard Money Lenders of 2023
To evaluate the hard money lenders in this guide, I relied on my 28 years of real estate sales, coaching, and investing experience. I also looked at the following criteria that I think are most useful for newer real estate investors:
- Interest rates and fees
- Reputation in the real estate industry
- Whether or not they work with new investors
- Minimum credit score required
- Maximum loan amount and prepayment penalties
How Do I Know if I Need a Hard Money Lender?
There’s a reason hard money loans are a bit of a niche product. Most are more expensive than conventional loans. The average mortgage rate is usually 3% higher than a non-occupied loan and around 5% higher than an owned-occupied conventional loan. The higher interest rate may be a deal killer if you intend to hold the property long term. You may pay less in fees, however.
If, on the other hand, you only intend to hold the property short term—as is typical with most fix-and-flip projects—the higher interest rate may be insignificant to the deal. The primary advantage of a hard money loan is that most lenders are more concerned with the quality of the asset over the quality of the borrower. They focus on the deal, how the numbers pencil out, and the creditworthiness of the borrower. The loan may be approved as a non-recourse loan with just a soft credit pull on the borrower. It may also include the funds needed, over-and-above the purchase price, to rehab the property.
Many investors I know use hard money loans when there simply isn’t time to close on a traditional loan. If you have a good relationship with your hard money lender, you can get a deal closed within a few days.
As a borrower, you will need to weigh the higher interest rate against the easier underwriting, faster close, rehab cost drawdown, and lower fees.
It’s also worth noting that many hard money lenders have expanded their product offering beyond just fix-and-flip loans. Some hard money lenders now offer bridge loans for iBuyers, debt service coverage ratio (DSCR) loans for short-term and medium-term rentals, rental loans for BRRRR (buy, rehab, rent, refinance, and repeat) and house hackers, portfolio loans for stabilized properties targeted toward experienced investors with more than 10 properties, and even ground-up construction loans for small single-family and multifamily developers.
Alternatives to Hard Money Lenders
There are other ways to fund your real estate deals without using a conventional or national hard money lender.
Local Hard Money Lenders
This guide identifies the best national hard money lenders. But you should also do your own research and identify the best hard money lenders in your area. Every main urban market has local hard money lenders, often with a long history of funding local investment property deals. Local lenders tend to have deep local market knowledge, industry contacts, and the ability to move quickly to close on loans. They can be a tremendous asset when deals get complicated, as they’ve seen and navigated just about every problem that can threaten a project.
Private Lenders
Similarly, there are often a significant number of private lenders in every major urban market. Private lenders are usually individuals who have capital available to lend on residential real estate property, subject to the security of a first mortgage deed. Most private lenders are more cautious than hard money lenders but will relax their underwriting rules for investors with whom they have a track record. You can find a list of private lenders by monitoring public property records or asking around at local investment club meetings or meetups.
How to Choose the Right Hard Money Lender
While choosing the right hard money lender for your investment can be challenging, there are six key criteria that investors use to select the right partner for their project:
1. The Type of Real Estate Project You Need to Finance
The most important criteria to consider when choosing a hard money lender is the kind of investment you want to make. Some hard money lenders specialize in fix-and-flip properties, while others are cash flow, buy-and-hold lenders. It’s also important to note that not all hard money lenders will finance multi-unit or owner-occupied properties.
2. Interest Rates
Unlike most traditional mortgage lenders, hard money lenders are private individuals or companies lending their own cash. Therefore, each can charge its own interest rates (within the legal limits, of course).
3. Loan-to-Value Ratio (LTV)
Loan-to-value ratio, commonly referred to as LTV, is what lenders use to represent the difference between the amount you put down on a property and the appraised value of the property. For example, if you buy a home appraised at $100,000 and you put $10,000 down, your LTV would be 90%.
The amount a hard money lender will lend on a property often depends on the type of project, the borrower’s credit, and the asset being purchased. Still, like interest rates, each hard money lender has different loan-to-value ratios. That means you need to figure out the relationship between the value of the property and the cost of the loan to determine whether or not it fits into the lender’s limits.
4. Loan-to-Cost Ratio (LTC)
The loan-to-cost ratio is a measure of how much cash you contribute to the project compared to the total amount of money loaned by your lender. Lenders use LTC along with LTV to determine how much money they will lend you for a given project.
For example, let’s say you want to purchase a property appraised at $75,000 that will require $25,000 in renovations. That means the total cost of this project would be $100,000. A lender with a maximum LTC of 85% would only lend you $85,000 of the $100,000 needed for the project.
5. Upfront Fees
The goal of most hard money lenders is to make short-term loans that are repaid quickly so they can lend that same money out multiple times each year. To maximize profits, many charge upfront fees of between 1% and 5%. These are typically labeled as origination fees, upfront costs, or points.
6. Your Credit & Past Experience
While many hard money lenders prefer to work with experienced investors with a good credit history, some are open to newer investors or investors with less than perfect credit.
Hard Money Lending FAQs
This is a very broad topic and you may still have questions about hard money lending, including how to get a hard money loan, interest rates, and the differences between hard money lending and conventional home mortgage financing. We are here to help! Build off of the work I have done for you already—but don’t stop there. The answers below will help you ask potential lenders follow-up questions and research their terms to find the right hard money lender for you and your next real estate investment project.
What is a hard money loan?
A hard money loan is a type of short-term property financing provided by a lender—usually a company or an investor. As opposed to a traditional mortgage loan that’s typically paid back over 15 to 30 years, a hard money loan term can be as little as one to three years.
Hard money loans can incur higher outlays than a traditional mortgage, but their costs are offset by their shorter terms. For a hard money lender, the risk is higher, but so is their potential reward.
These loans are called hard money loans because the collateral used is a hard asset: The property itself is typically the collateral for the loan. Unlike traditional mortgage financing, a hard money lender makes lending decisions based primarily on the value of the property being purchased and less on the creditworthiness of the borrower—although that’s still a factor.
Like traditional mortgage providers, many hard money lenders still require a full credit report, asset verification, and down payment from the borrower. However, they are less stringent on qualifications like credit score, debt-to-income ratio, and asset verification.
How does a hard money loan work?
Hard money lenders offer short-term loans on real estate, often covering both the purchase and development or rehab costs. These loans are commonly used with real estate investment deals like fix and flips or buy-rehab-rent-refinance-repeat projects (or BRRRs). Hard money loans are also sometimes used to avoid a looming foreclosure.
A hard money lender can offer ideal loan terms for specific situations, including no income verification and interest-only loans. Hard money lenders aren’t subject to the same regulatory and compliance rules as conforming loan lenders, such as retail banks.
What are hard money loans used for?
Hard money lenders offer short-term loans on real estate, often covering both the purchase and development or rehab costs. These loans are commonly used with real estate investment deals like fix and flips or buy-rehab-rent-refinance-repeat projects (or BRRRs). Hard money loans are also sometimes used to avoid a looming foreclosure.
How do you get approved for a hard money loan?
Hard money loans are different from conventional mortgages because they don’t require all the documentation or strict guidelines to qualify. Due to the flexible nature of hard money loans, there aren’t set guidelines to qualify. However, most hard money lenders will consider the following criteria when approving your loan:
Down Payment
The down payment you are willing to offer up is the most significant qualification factor for a hard money lender, but not the only one. While there are low-down payment options, most require 20% to 30% down. The higher the down payment, the lower the LTV. This reduces the lender’s risk if they have to take the property back in the event that you fail to repay the loan.
Collateral
Most hard money lenders are going to place a high priority on the collateral. This often includes the property itself and can encompass other properties and investment accounts they can cross-collateralize. Lenders need to be sure that the collateral they are securing is more than enough to cover the loan and recovery costs.
Credit Score
While your credit score is vital to some hard money lenders, it is not as important as the other factors in this list. The minimum credit score requirement for hard money loans can depend significantly on the collateral and your down payment.
Some hard money lenders will lend on credit scores as low as 600. However, the higher the LTV, the greater the risk to the lender, which means they may require a better credit score or more collateralized assets to extend the loan to you.
On the other hand, if you have a large enough down payment and substantial collateral, the hard money lender may not even check your credit.
Income Verification
In most cases, your ability to repay the loan is dependent on your personal income or the income from your business. Hard money lenders will want to know that you have enough income to cover the payments on the loan.
Unlike a traditional mortgage, where the lender will verify your employment and debt-to-income ratios, many hard money lenders may only need to verify through your bank statements that you have the income to cover the monthly payments.
Income verification loans deservedly got a bad name after the Great Recession of 2008. However, they are still an important tool used by many real estate investors and self-employed borrowers.
The Property’s Rental Income
If the real estate you’re purchasing is a cash-flow property, some hard money lenders can use the rental income to qualify you for the mortgage in lieu of employment-based income.
What is a DSCR loan?
A debt-service coverage ratio loan enables real estate investors to qualify for a loan on rental income the property generates, rather than personal income. The lender needs to be satisfied that there will be enough income from renting the property to cover the loan repayments. This is especially helpful if you operate a short-term rental with high nightly rental rates. DSCR loans are ideal for self-employed investors, those with multiple mortgaged rental properties, and anyone looking to grow their portfolios rapidly.
Related article:
What costs are involved in a hard money loan?
In addition to your down payment, be prepared to pay 1% to 5% in upfront fees. Additional fees from the hard money lender may cover costs such as documentation, underwriting, or closing fees.
These are typically called origination fees, upfront costs, or points. While some lenders charge only one of these fees, others may charge all three, so be sure to ask. Also be sure to inquire if your loan has any extension fees you’ll be required to pay should your fix and flip take longer than expected to renovate. And ask about any prepayment penalty in the event you decide to pay off the loan early.
Other costs you must account for are property insurance, transfer taxes, and title and escrow fees.
Do I have to make payments on a hard money loan?
Most hard money loans require interest payments during the term of the loan. However, well-qualified borrowers may not be required to make them during the loan term.
Why are interest rates higher on hard money loans?
Due to the risky nature of hard money loans, the interest rates are higher than traditional mortgages. The actual interest rate may also change based on the property type, borrower’s credit score, and the use of the loan. For example, a fix-and-flip loan will almost always have a higher interest rate than a rental property.
What type of projects do hard money lenders finance?
Hard money loans are typically used for fix and flips, hard to finance income properties (like multi-family properties larger than five units), and mixed-use properties. Some borrowers use hard money lenders to provide a bridge loan so they can purchase their replacement property before selling what they already own.
Investors also use this technique to do a reverse 1031 exchange. The investor might use a hard money loan to purchase a sizable multi-unit investment property. Then, after they purchase and close, they sell their rental houses to satisfy the trade.
Related article: How to Explain 1031 Exchange Rules to Your Clients (in Plain English)
Investors also use hard money loans to fund new construction. RCN Capital offers up to 90% LTC new construction financing, for example.
Do hard money lenders cover renovation costs?
Yes, most hard money lenders will lend on both the purchase price and renovation costs up to 75% of the property’s after-repair value (ARV).
For example, say you find a motivated owner willing to sell you their dilapidated property in a nice neighborhood for $200,000. If you were to remodel the kitchen, paint the exterior, and do other minor repairs, the property would be reasonably worth $350,000. If the lender provides $200,000 for the purchase price and up to $62,500 for the repairs, the resulting loan would be 75% of the ARV.
How fast can I get a hard money loan?
While some hard money lenders claim they can close in as fast as five days, other factors may take longer than a business week. To finance a property, you will need to have a title insurance policy, and it may take a few days to ensure that all the liens are accounted for and paid to guarantee a clear title. Therefore, count on it taking a minimum of two weeks to complete the transaction.
Do I need an appraisal for a hard money loan?
While not all hard money lenders will require a traditional appraisal, they will have the property evaluated by a professional to ensure that the collateral is sufficient to secure the loan.
Do hard money lenders check your credit?
Not all hard money lenders require a hard credit inquiry. Some can just use a soft inquiry that won’t affect your credit score.
If credit is a concern, most hard money lenders will approve loans for borrowers with bad credit if they have a cosigner, can put up a larger down payment, or offer additional collateral for the loan.
Bottom Line
Hard money lenders are not for everybody, but for new and experienced investors, they can become an indispensable partner. Like any investment, there is risk involved. You can significantly reduce your risk by doing your research and acquiring as much knowledge as possible. If you have unanswered questions, please drop them in the comment section below.
