You have a 28-unit apartment building under contract at a discount. The seller will not extend escrow past two weeks, your bank wants stabilized income, and agency debt will not size because rents cannot support a 1.25x debt service coverage ratio, or DSCR.
That choice gets expensive fast. One point on a $2.5M loan costs $25,000, and a 30-day delay can cut 50 to 75 basis points from your internal rate of return, or IRR, on a nine-month hold.
The right test is simple: judge every term sheet by exit fit, total cost to exit, and the lender’s odds of closing on time.
Key Takeaways
Pick the lender that fits the exit, not the one with the lowest quoted rate.
- Plan the exit first. Hard money works when the sale or refinance path is clear.
- Know the usual structure. Expect 6-24-month, interest-only loans at 9-14% plus 1-4 points. Leverage usually tops out at 60-75% of current value or after-repair value, or ARV.
- Model cost to exit. Add interest, points, legal fees, draw fees, extensions, minimum interest, and prepay costs over the same hold period.
- Verify the operator. Confirm licensing, capital source, and recent multifamily closings before you wire deposits or pay for third-party reports.
What to Evaluate Before Comparing Price
Screen for deal fit first, then compare price over the same hold period.
Leverage model: Ask whether the lender sizes on as-is loan-to-value, cost basis, or ARV, and whether rehab dollars are funded upfront or through draws.
Exit feasibility: Reverse-engineer your post-renovation NOI against a 1.25x DSCR target, then run a stress case at 10% lower income.
Total pricing: Stack rate, points, legal fees, appraisal costs, draw fees, extension charges, minimum interest, default rate, and prepay into one number.
Recourse terms: Full personal guarantees are common, non-recourse is rare, and springing recourse can turn a small document breach into full liability.
Draw process: Get a written schedule for inspections, holdbacks, per-draw fees, funding timing, and whether you pay interest on undrawn funds.
Third-party diligence: Confirm the appraisal or broker price opinion, or BPO, survey needs, lender counsel, and whether a Phase I environmental site assessment, or ESA, is required.
What Exactly Is a Multifamily Hard Money Loan?
Hard money solves a timing or property problem that bank debt cannot solve yet.
It is short-term, asset-based financing secured by the property. In U.S. lending practice, five or more units count as multifamily, while 2-4 unit properties use residential loan rules.
Bridge and hard money overlap, but they are not the same. Bridge lenders usually want a near-stabilized asset and more runway, while hard money leans harder on collateral, speed, and the exit plan.
Most loans are interest-only with a balloon payoff at maturity. Expect a personal guarantee in most cases, plus a written plan to sell or refinance before the term ends.
3 Big Reasons Multifamily Operators Use Hard Money
Operators reach for hard money when speed, asset condition, or a short refinance path rules out cheaper debt.
Close Fast
Clean files can close in 7-14 days. Property-first underwriting, desktop valuations, and in-house credit teams cut out weeks of committee review.
Fund Transitional Assets
These lenders will fund down units, major system replacements, and interior turns that banks avoid. That lets you fix deferred maintenance, lease units, and season the income before a refinance.
Bridge To Permanent Debt
The right lender underwrites the exit the way you do. It sizes proceeds and term around stabilized net operating income, or NOI, and a refinance that still works if rent growth slips.
Where to Source Reliable Lenders and How to Vet Them Fast
Fast capital only helps if the lender is licensed, direct, and proven on similar multifamily deals.
- Start with direct private lenders and bridge shops that work in your market and deal size. Favor firms with closed 10-100 unit deals in the last 12 months.
- Ask operators, brokers, and property managers who closed similar projects. Press for details on retrades, inspection delays, draw friction, and funding day performance.
- Verify licensing through NMLS Consumer Access, the national licensing database, and through state regulatory sites. Save screenshots in your deal folder before your deposit becomes nonrefundable.
- Request three recent multifamily borrower references. Ask whether the quote matched the closing documents and who controls final credit authority.
If speed is critical on a 10-40 unit value-add, shortlist experienced shops such as ConstLending for an asset-focused underwrite, a 7-14 day close, and a clear rehab draw process. Also confirm recent closings in your unit count, draw timing, extension terms, capital source, and final credit authority before you compare locally proven hard money lenders.
Your 14-Day Closing Playbook
Fast closings happen when title, diligence, insurance, and entity documents move on day one.
Day 1-2: Open title and escrow, order the appraisal or BPO and ESA, finalize the scope and draw schedule, deliver entity documents, and engage lender counsel.
Day 3-5: Complete site access, secure insurance quotes including builder’s risk, lock signer availability, and confirm wire instructions with a verbal callback.
Day 6-9: Clear title issues, review valuation and ESA reports, answer underwriter conditions, and prepare the closing statement with prorated interest and fees.
Day 10-14: Get final credit sign-off, collect signatures, fund the loan, mobilize vendors, and schedule the first draw inspection before work starts.
Make Hard Money Work for You, Not Against You
Hard money works when the exit is credible and the documents stay true to the quote.
Fit first, price second. Compare every term sheet on cost to exit, verify licensing, call references, and build a closing plan that can absorb small delays.
Watch for vague capital sources, teaser points that grow in documents, heavy minimum interest, and recourse terms that spring on technical defaults. Hard money is a precision tool, not a cure-all.
