What are your Exit Options when Applying for a Hard money Loan

An exit strategy when applying for a hard money loan help you plan your finances, and avoid any eventualities as the due date approaches.

last updated Wednesday, May 17, 2023
#Hard money loan #Real Estate Investors

John Burson     Subscribe
What are your Exit Options when Applying for a Hard money Loan


It would be best to have an exit strategy when acquiring real estate through hard money loans. Most hard money lenders offer a short payment period (9 months to 3 years ) with higher interest rates (7.99 to 12 percent) than traditional lenders. It is, therefore, vital to know what you are walking into and plan how to repay the loan beforehand.

Some of the most common lender profiles with solid strategies include:

The Experience Real Estate Investors

Real estate investors with experience in house flipping can often predict early how long they will spend on a property. This entails any related eviction, renovations, property marketing, and property sale. These borrowers use their experience in the market to plan their loans and will often repay the loan before it is due.

Owner Properties with a Short Sale

Private homeowners who currently occupy the property and have had a short sale or foreclosure in the recent past (up to three years) take out hard money loans with the confidence that they can refinance the home through conventional lending as soon as the short sale date arrives. Often, they have the third-anniversary date in mind, and they will start the refinancing process with a traditional lender at least a month before the date.

Borrowers working in Self-Employment.

Self-employed borrows who declare a small income in their income tax returns and therefore fail to qualify for conventional loans often apply for hard money loans with the following conditions in mind:

  • They will take out the loan and then start filing their tax returns with a higher income for at least two years
  • They will look for a portfolio lender who is willing to consider the liquid and real estate assets, net income, and business revenue and is ready to put some deductions on the AGI (Adjusted Gross Income)

Unconventional or Hard-to-Find Down Payment Funds

When looking for an additional down payment, it does not qualify as a gift if it comes from a friend and not a relative. In conventional loans, gifts from family members are generally accepted. However, gifts from friends are classified as personal loans, disqualifying you from accessing a traditional loan. Once you understand this, you can look for ways to use the gift and work the system to access traditional financing at a lower interest rate.


A solid exit strategy for home buyers or real estate investors would be best. With the options above, you can choose the category that suits you best and learn how to leverage the available opportunities as your exit strategy. Weigh the available options or devise alternative investments that make sense to you but have a solid exit strategy.


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