Using Hard Money to Fund Your Real Estate Deals

“No Money Down” real estate deals sound enticing and the late night gurus make it seem as if anyone can get cash back at the closing table on all their deals. Yes, you can do a real estate deal and get cash back at the closing table. Yes, you can buy a property with no money, no job and no credit. But for those of us in the real estate investing business, we know that everything comes with strings attached. The trick is to know what strings you can pull on and what strings will hang you. 

Many no money down deals sound great when you hear them on the infomercial, but when you get into the actual mechanics of structuring the deal, you may find yourself dangerously close to committing loan fraud. Since federal prison is probably not your idea of a serene vacation spot, educating yourself is the best insurance to keep yourself away from the scams. Until you have gained enough experience to know when to walk away, remember this basic rule: If a deal sounds too good to be true, it probably is. 

One legal way to get into a property and get cash back at the closing table is to use hard money. Hard money is a term used to describe money that is loaned at a relatively high interest rate. Hard money has been termed the “loan of last resort” but that is not the case for real estate investors. Typically, the person who is using hard money cannot use traditional methods of financing such as going to a bank or mortgage company either because their income is not verifiable, their credit may have “dings” or because of the condition or type of property.