What Real Estate Investors Need to Know About Hard Money.
When you think about buying real estate, your mind probably goes to one of two places: a traditional bank mortgage or a cash offer. Banks require a lengthy approval process, often taking 30 to 60 days. Cash offers are fast but tie up huge amounts of your personal capital. What if there was a hybrid option that combined the speed of cash with the leverage of financing?
This is where hard money lending comes in. It’s an asset-based lending strategy that can help you close deals faster, keep your projects moving, and scale your real estate business. This article will explain what hard money is, how it works, and why it might be the right tool for your next investment.
What Is Hard Money Lending?
Hard money is a type of short-term, asset-based loan. Instead of focusing primarily on your personal credit score and income like a traditional bank, a hard money lender evaluates the deal itself. The loan is secured by the value of the property: the "hard" asset.
Hard money lenders make lending decisions based on the property's current and future value, the borrower's business plan, and the borrower’s background and experience level. This approach allows for a much quicker funding process compared to the 30- to 45-day underwriting period required by most banks. It’s a fast, efficient way to keep your capital deployed and your projects on track without getting bogged down by appraisals and lengthy bank approvals.
How Does Hard Money Work?
The most important factor in real estate investing is the velocity of money. Let's say you find a house to flip. You plan to buy it for $100,000, invest $50,000 in renovations, and then sell it. If you go through a bank, it could take 60 days just to close on the purchase. That’s two months before you can even start swinging a hammer.
A slow closing also makes your offer less attractive to the seller. They have to wait two months to get their money, dealing with inspections and financial contingencies. With a hard money loan, you could present an offer and close in as little as four days. This speed gives you tremendous leverage. You might even negotiate a lower price—say, $90,000—because you can promise the seller a fast, hassle-free closing.
On day five, you’re starting the renovation. By day 60, your property could already be back on the market, the same day you would have just been closing with a traditional bank. That’s the power of speed with hard money lending.
Why Liquid Lending Solutions Is Different
Not all hard money lenders are created equal. Many hard money companies were started by people from the banking or commercial lending industries. At Liquid Lending Solutions, every single one of our owners is a full-time real estate investor.
We eat, sleep, and breathe real estate. With a collective 60 years of experience, we underwrite deals and make lending decisions based on the same principles we use for our own investments. In many cases, we can get people the lending they need in 72 hours.
We also understand the local market. Having funded approximately 550 loans, primarily in the Midwest—Omaha, Des Moines, and Kansas City—we have a deep understanding of our community.
More importantly, in our five years of operation, we have never failed to close on time. We’ve heard the horror stories of other lenders changing terms, adding fees, or pulling lending at the last minute. That has never happened with us. When we commit to a loan, we follow through. Our borrowers know the exact terms from day one.
Common Scenarios for Hard Money Lending
There's a misconception that hard money is only for new, "risky" investors. In reality, we've found it's often the opposite. Even the most successful investors run out of their own capital as they take on larger deals, like commercial properties or multifamily buildings. Our best borrowers are often experienced operators who have consistent deal flow and know they have a reliable lending partner.
Hard money allows these investors to keep their own capital liquid for rehabs, carrying costs, or other opportunities. Instead of using $500,000 of their own cash to buy one or two properties, they can borrow from us to fund multiple deals at once, dramatically increasing their capacity.
We’ve funded a wide range of projects:
Single-Family Flips: The classic use case, allowing investors to buy, rehab, and sell properties quickly.
Multifamily Properties: Experienced borrowers use our funds to acquire troubled multifamily assets quickly, reposition them, and then refinance with a traditional bank.
Portfolio Acquisitions: We helped one investor acquire a package of 23 single-family homes with a $2.5 million loan that closed in two weeks—a timeline impossible for a bank. He was able to start selling and refinancing the properties immediately, closed on all of them, and paid the loan off in two and a half months.
Risks and Mistakes to Avoid
Hard money lending is a powerful tool, but it comes with its own set of risks if not used correctly. The interest rates are higher, so your business plan needs to be solid.
Here are the most common mistakes we see:
Not Knowing Your Numbers: This is the number one killer for new investors. You must have accurate after-repair value (ARV) comps and a realistic rehab budget. Underestimating costs or overestimating the final sale price can erase your profit margin.
Being Unprepared: When you find a great deal, you need to move fast. Not having your documents in order, like an LLC, tax returns, or financials, can delay the funding process. Get your house in order by creating a simple share drive with everything a lender might need.
Lacking a Clear Business Plan: A plan to hold a property for 18 months with a 19% interest rate is not a good plan. The speed of paying off hard money is just as important as the speed of getting it. Your plan should be detailed, with a clear timeline and contractor bids secured before you close.
Poor Communication: We aim to make lending decisions within 24 hours, but we need information to do that. Be ready to tell your story and articulate your plan. A real estate bio or resume outlining your experience can help build a lender’s confidence in you as a borrower.
Proven Results and Success Stories
Since our inception five and a half years ago, Liquid Lending Solutions has paid out over $4.5 million in distributions to our investors. We've funded over 550 loans, totaling more than $100 million, without ever missing a payment.
These numbers represent real success for our borrowers:
One experienced investor used an $800,000 loan to secure a property far below market value. He had a bank refinance already in the works but needed to close immediately to beat out another buyer. We funded the deal, and he paid us back in 16 days, locking in a phenomenal deal for himself.
Another borrower, Jose, used a hard money loan to acquire a package of single-family homes with no money out of his own pocket for the purchase. He sold off a few to recoup profit and then refinanced the rest into long-term bank loans, creating a significant amount of equity and cash flow for himself.
For our investors, the results are equally compelling. We provide a consistent, reliable return that is secured by a diverse portfolio of real estate assets. It’s like a mutual fund approach to debt investing, mitigating risk while providing a steady monthly income. This has changed the lives of our partners, from helping family members secure their retirement to allowing seasoned investors to generate more passive income without the hands-on work.
If you’re a real estate investor looking to move faster and scale your business, hard money lending could be the key. By understanding how it works and partnering with an experienced lender, you can unlock opportunities that traditional financing simply can’t offer.
