Hard Money · Florida

How does a hard money loan work?

A hard money loan is short-term real-estate financing in which the property's value, project economics and exit strategy carry substantial weight in underwriting. Investors commonly use it to buy, renovate, stabilize or refinance property when long-term financing does not fit yet. The lender expects a defined exit—usually a sale or refinance—before the short-term loan matures.

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By Chad Evers, NMLS #2822744 Last reviewed: October 29, 2026

What does “asset-based” hard money actually mean?

Hard money is often described as asset-based lending, but that does not mean the lender ignores the borrower.

The property is central to the credit decision because it is the collateral and usually provides the primary exit.

The lender may evaluate:

For a renovation project, the lender is asking two separate questions:

  1. How much money is at risk before the project is finished?
  2. If the business plan does not work, what is the collateral likely to be worth?

A strong projected value alone does not automatically support the requested loan.

How is a hard money loan sized?

Investor hard-money programs typically evaluate more than one leverage measure.

Common concepts include:

Loan-to-purchase price

This compares acquisition financing with the contract price.

If a property costs $250,000 and the lender funds $200,000 toward the acquisition:

$200,000 ÷ $250,000 = 80% of the purchase price

Loan-to-cost

This compares the total loan commitment with the investor's total project cost.

Assume:

Loan-to-cost:

$260,000 ÷ $325,000 = 80%

Loan-to-after-repair value

If the projected completed value is $400,000:

$260,000 ÷ $400,000 = 65%

A lender may apply several limits, and the most restrictive one can determine the final loan amount.

Actual leverage varies by program, property, borrower experience and project risk.

For a deeper look at renovation financing specifically, see fix-and-flip loans in Florida.

Does the lender give you the renovation money at closing?

Often, no.

A renovation loan may separate the funds into:

The investor generally pays for or completes eligible work according to the lender's draw process. The lender may require inspections, invoices, photographs, lien releases or other evidence before releasing the next portion of the construction or rehab funds.

Draw administration matters because the headline loan commitment is not necessarily the same as cash available on day one.

Before closing, an investor should understand:

Those rules vary by program.

How do points and fees work?

A point is simply a percentage of the loan amount.

For example, if a loan amount is $260,000:

That is arithmetic, not a statement that a particular loan will charge one or two points.

Other potential transaction costs can include:

Every proposal should be reviewed using the actual fee schedule for that transaction rather than a generic “hard money cost” estimate.

How long does a hard money loan last?

Hard money is designed as short-term financing, not permanent debt.

The exact maturity varies by program and transaction.

The important underwriting question is not merely the stated term. It is whether the investor has enough time to:

  1. close;
  2. complete the work;
  3. obtain required inspections or certificates;
  4. lease or sell the property if needed;
  5. complete the refinance or sale that repays the hard-money loan.

A six-month renovation plan with a six-month loan would leave almost no margin for permitting delays, contractor problems, weather, appraisal issues or a slower refinance.

The financing timeline should therefore be evaluated against the real project timeline, not an optimistic construction schedule.

What happens if the project is not finished before maturity?

The borrower still owes the loan at maturity.

Some lenders may offer an extension, but an extension should never be treated as automatic.

An extension can depend on:

The safer approach is to underwrite the exit before taking the bridge loan.

If the plan is to hold the finished property as a rental, ask early whether the expected rent, value, property condition and ownership structure are likely to support the intended long-term refinance.

See how to refinance a hard-money loan into a DSCR loan for that exit specifically.

Who uses hard money?

Typical investor uses include:

Hard money should solve a temporary financing problem.

If the borrower has no credible path to sell or refinance the property, short-term debt can turn a project delay into a maturity problem.

What does a full Florida hard-money scenario look like?

Assume an investor is buying a single-family property in Florida.

Acquisition and renovation

Math:

Loan-to-cost:
$260,000 ÷ $325,000 = 80%

Loan-to-completed value:
$260,000 ÷ $400,000 = 65%

That means the investor still has substantial cash in the transaction.

Now assume the investor also budgets:

Total cash needs are therefore not limited to the difference between the purchase price and loan proceeds.

The investor must consider:

equity contribution + closing costs + carrying costs + contingency + any rehab costs required before reimbursement

The exit

Suppose the investor plans to keep the property rather than sell it.

The completed property is expected to rent for $3,200 per month.

Assume, for planning purposes only, that the eventual long-term loan produces total monthly PITIA of $2,500.

Illustrative DSCR:

$3,200 ÷ $2,500 = 1.28x

The PITIA is an assumption for this example, not derived from an interest rate and not a quote.

That does not mean the refinance is assured. The permanent lender will separately evaluate current value, property condition, rent documentation, seasoning, credit, reserves and its program rules at the time of refinance.

The short-term loan and permanent exit are two different underwriting decisions.

Why do Florida permits matter on a hard-money deal?

Because the lender's collateral is the property after the work is completed.

Florida law generally requires a building permit before construction, alteration, modification, repair or demolition unless a specific exemption applies.

An unpermitted renovation can create problems with:

Before financing a rehab, the investor should know which work requires permits and whether the proposed contractor is legally permitted to perform it.

Hard money can finance construction risk. It does not erase permitting risk.

Why does insurance matter more in Florida?

Insurance should be addressed before the closing date, not after financing is otherwise ready.

A Florida investment property may face underwriting issues related to:

The required policy depends on the property and project.

A loan that works on paper can still be delayed if appropriate coverage cannot be bound on acceptable terms.

Insurance assumptions should therefore be built into both the acquisition budget and the holding-cost budget.

What is different about a Florida condo flip?

The unit itself is only part of the risk.

For condominium properties, an investor may also need to understand the building and association.

Relevant issues can include:

Under current Florida law, certain residential condominium and cooperative buildings of three or more habitable stories are subject to statutory milestone-inspection requirements based primarily on building age. Local conditions can affect when those inspections are required.

A lender may impose its own project requirements beyond state law.

That is why a visually attractive condo at a strong purchase price can still become a difficult financing or resale project if the building itself has unresolved issues.

What is the exit from a hard money loan?

There are two basic exits.

Sell the property

For a flip, the property is renovated and sold. Sale proceeds repay the hard-money loan.

The key risk is that the completed property sells later or for less than expected.

Refinance the property

For a BRRRR or long-term rental strategy, the property is renovated, stabilized and refinanced into long-term financing.

The refinance is a new loan with new underwriting.

The permanent lender may evaluate:

Do not assume that because the hard-money lender financed the project, the permanent lender will automatically refinance it.

What you'll need

For a serious hard-money review, have:

When doesn't hard money work?

Hard money is usually a poor fit when:

The fastest loan is not useful if it creates an unsolvable maturity six or twelve months later.

FAQ

No. Property value is important, but lenders typically also review the purchase price, project cost, rehab scope, borrower liquidity, experience, credit, title, insurance and exit strategy. “Asset-based” does not mean borrower-blind.

Potentially. Experience requirements vary by program. A first-time investor may face different leverage, liquidity, contractor or documentation requirements than an experienced operator. The deal still needs a supportable budget, value and exit.

Often they are held back and released through draws as work is completed. The exact process varies. Investors should understand reimbursement rules, inspection timing, eligible costs and how much cash they may need to advance before a draw is funded.

An extension may be available under some programs, but it is not automatic. The lender may review project progress, payment history, remaining work, value and exit before agreeing. Extension terms and fees vary, so the original project schedule should not depend on receiving one.

Potentially. Investors often refinance a completed rental into longer-term financing, including DSCR financing when the property and borrower meet the new program's requirements. The refinance is a separate underwriting event and should be evaluated before relying on it as the exit.

Florida law generally requires permits for construction, alteration, modification, repair or demolition unless a specific exemption applies. The exact requirement depends on the work and local enforcement agency. Investors should verify permit requirements for the planned scope before assuming work can begin.

They can. Association finances, insurance, inspections, structural findings, assessments and planned repairs can affect both the short-term lender and the property's resale or refinance. Certain older multi-story condominium and cooperative buildings are also subject to Florida milestone-inspection requirements.

Educational information only. Not a commitment to lend, and not tax or legal advice. Programs, limits and pricing are set by the lender and vary by borrower, property and state.

Sources

Weighing Hard Money on a Florida Deal?

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