5 Common Myths About Hard Money…and the Truth
Hard money lending often gets a bad rap among real estate investors. Whether you're just starting or scaling your portfolio, chances are you've heard some pretty scary stories about hard money loans. But what if most of what you've been told simply isn't true?
In this post, we'll tackle five of the most persistent myths about hard money lending, drawing from insights shared by Owen Dashner and Collin Schwartz, the team behind Liquid Lending Solutions. With over 550 loans completed in five years and $100+ million loaned, they've seen firsthand how these misconceptions can hold investors back from accessing valuable financing tools.
Myth #1: Hard Money Is Too Expensive
The Reality: Hard money isn't about the interest rate. It's about the opportunity cost.
Owen explains, "I think [this is] something that you hear a lot of new investors balk at when they first learn about hard money. They say, 'Oh, wow. That interest rate's crazy high. I've never paid that.'" But here's what gets lost in that sticker shock: hard money is a line item, not a long-term commitment. Owen breaks it down with a practical example:
"Let's say you've got two [projects] going on, all your money's in both of them, and you've got a third one that comes up and it's a deal that you know you can make 40 grand on. Are you not going to do that deal because it might cost you $5,000 to make that 40?"
The numbers back this up. Of the 550+ loans Liquid Lending has completed, the average loan length is just 3.9 months. When you're only carrying that financing for a few months, the higher interest rate becomes a manageable business expense rather than a deal-killer.
Myth #2: Hard Money Is Only for Desperate Situations
The Reality: Smart investors use hard money strategically to gain competitive advantages.
The misconception that hard money is a last resort couldn't be further from the truth. In fact, it's often the tool that separates successful investors from those who struggle to scale.
Collin shares a perfect example of a project that was listed for $3.5 million. "It was 24 townhomes and five duplexes, so they wanted $3.5 million for it. I told the owner, 'How about we close in 14 days and I give you 2.7 million.'" The seller accepted, saving Collin $800,000 simply because he could offer certainty and speed through hard money financing.
Owen reinforces this point from a seller's perspective: "If you have somebody where they know the financing's good and I got a solid offer and it's a quick closing, nine times out of ten I'm taking that over going for the full price and, you know, taking it out on a full term and subjecting myself to inspections and timelines and stuff like that that I have no control over.”
Myth #3: Hard Money Limits Your Deal Flow
The Reality: Hard money actually accelerates scaling by freeing up your capital for multiple projects.
Many investors think they should stick to using their own cash to avoid financing costs. But this approach severely limits growth potential. "Do you want to do one deal and make $100,000 from that deal, or do you want to do three deals and make $80,000 from each one of those deals?" Collin asks. "Hard money is going to give you the access to utilize to do that. You're going to be able to take down more projects."
Owen explains the scaling mindset: "Our best borrowers are really good operators, they're doing three, four, five flips a month. And those are the ones that understand that lending and soft costs are a line item just like rehab is when you go and do a full remodel on a flip property." With access to capital through hard money, investors can:
Take on multiple projects simultaneously
Move quickly on time-sensitive opportunities
Build a pipeline of deals rather than waiting for each project to complete
Myth #4: Hard Money Is Only for Residential Fix-and-Flips
The Reality: Hard money works for commercial deals, multifamily properties, and creative financing structures.
"[Hard money] is primarily looked at as a residential tool," Owen notes. But Liquid Lending has expanded far beyond single-family rehabs. They've successfully funded:
Multifamily apartment buildings
Commercial real estate transactions
Portfolio acquisitions
Bridge financing for refinancing situations
Collin shares, "We had a local investor in town, a gentleman who owns hundreds and hundreds of doors has a successful management company. Well, they found a deal [for] I believe 60 units in rural Nebraska. They needed to close on it quickly, but they knew it was such a great deal that there was probably a million dollars of equity in there. They borrowed a few million dollars from us, had the loan out for 60 days, and were able to refinance that, pay us off, and now own that building essentially for free with no money out of pocket."
Myth #5: Hard Money Lenders Want to Take Your Property
The Reality: Reputable hard money lenders succeed when their borrowers succeed.
Perhaps the most damaging myth is that hard money lenders are predatory "loan-to-own" operations waiting for borrowers to default so they can seize properties.
Collin addresses this directly: "We are all investors ourselves at Liquid Lending. So what we want is the success of our borrowers. That is one of the most important things. We are not interested in taking over their properties. We want to see them be successful. We want to see them do this multiple times."
This makes business sense too. A lender that helps investors succeed will:
Generate repeat business
Build a strong referral network
Maintain a healthy loan portfolio with fewer defaults
Scale their lending operation sustainably
The Truth About Smart Hard Money Use
Understanding these myths helps, but how do you actually use hard money effectively? Here are our top four tips.
Become an Expert Deal Finder
"I think the best use case for a new investor is to be an expert deal finder," Owen suggests. "If you are that and nothing else, you will go a long way in this business."
Build Financing Into Your Proforma
Don't look at hard money costs as an unexpected expense. Factor them into every deal analysis from the start.
Have Multiple Financing Tools
The most successful investors don't rely solely on hard money. They combine it with lines of credit, cash, and private financing as the situation demands.
Focus on Execution Speed
Hard money's biggest advantage is speed. Use it when timing matters more than getting the absolute lowest cost of capital.
Making Hard Money Work in Today's Market
Since interest rates are higher than they've been in years, some investors worry that hard money has become even less attractive. But Owen and Collin see opportunity in the current environment.
"Right now is the time when a lot of people are scared to buy deals, so there's a lot of opportunity out there," Owen observes. "We're seeing a lot more deals now that are coming on the market where debt's been resetting that people bought in 2020, 2021." For investors ready to act while others hesitate, hard money provides the tool to capitalize on these opportunities.
Don't let these myths keep you from exploring how hard money might fit into your investment strategy. Like any tool, it's not right for every situation, but used properly, it can be the difference between staying small and scaling successfully.
