INVESTOR GUIDE · HARD MONEY RATES
Hard money loan rates
What moves them, and what a flipper actually controls. You don’t control the market. You control who signs, the deal, and how fast you get out of the loan.
The short answer
- Hard money rates move with market conditions, like everything else. You don’t control that.
- You can put your best credit partner in the signing position and partner with investors who have a track record, for better terms and rates.
- Follow the MAO: stay at or below your maximum allowable offer.
- Buying right gets you out of the hard money loan and into long-term financing faster.
WHAT MOVES THE RATE
What you don’t control
You don’t control the market. Hard money rates move with market conditions like everything else, and spending your energy shopping for a slightly lower rate misses where the money is actually made.
WHAT YOU CAN CONTROL
Who signs and who’s on the deal
- Your best credit partner in the signing position. Put the strongest credit on the loan for preferred terms and rates.
- Partners with a resume. Partner with other investors who have a track record of exits using hard money. Their experience gives the entity experience, and experience gets better terms.
THE RULE
Follow the MAO
Your MAO, maximum allowable offer, is the most you can pay for a property and still come out of the rehab with the equity to refinance or sell quickly. Run it on every deal before you make an offer:
ARV × 70% − rehab = MAO
If the numbers don’t work at your MAO, walk away. Stay inside that number and you’re protected on the back end. The faster you exit, the less the rate matters. See how to size the whole loan in how to size a fix and flip loan.
THE EXIT
Get out of hard money fast
The cheapest hard money loan is the one you’re in for the shortest time. With no seasoning, you can refinance into a long-term DSCR loan on the new value as soon as the rehab is done, up to 80% of ARV. See our DSCR cash-out refinance.
STRAIGHT ANSWERS
Hard money rate questions
Can I negotiate a lower hard money rate?
No. You get what your deal, credit and experience qualify you for. You can shop banks, but you can’t negotiate the rate. Negotiate the purchase price instead; that’s where you control the outcome.
How do I lower the total cost of a hard money loan?
Shorten the hold. Every month you’re in the loan costs you interest and holding costs. Finish the rehab faster and refinance into a DSCR loan with no seasoning, and you’re out of the higher rate sooner.
What is MAO in real estate?
Maximum allowable offer: ARV × 70% − rehab = MAO. That number is your maximum purchase price.
KEEP READING
DSCR KINGS · INVESTOR FINANCING
Send us the flip
Purchase price, rehab budget and ARV. We’ll size the loan and the exit.
Business-purpose loans for investment properties only; not for owner-occupied homes. Lending guidelines, leverage and loan programs vary by lender and by state and are subject to change. Terms and approval depend on the property, the borrower’s credit and capital-partner guidelines and are not guaranteed. Examples are for illustration only.
