The Future of Fix and Flips: Navigating 2024’s Real Estate Challenges

Since the peak in the first quarter of 2022, the number of home flips nationally has been on a steady decline. With the rapid interest rate rises that started at the end of the first quarter of 2022, sales volume nationally took a nosedive, and the rate of home flipping started on a downward trajectory.

For those new to the concept, home flipping involves purchasing a property and reselling it for profit, often after making significant repairs and improvements. Understanding your financing options, such as through our Fix and Flip Loans, is crucial to success in this venture.

Challenges Posed by Overvaluation and Market Saturation

Stagnation in Property Sales and Impact of Rising Rates and Value Decline

Many home flippers were stuck holding flips they couldn’t sell at the end of 2022 and throughout 2023. This is due in part to higher interest rates that began to freeze home sales volume, but also due to properties going down in value from the time they were purchased, to the time when they were resold. This downward trend in prices, combined with increased holding time frames, has caused many home flippers to lose money .Navigating the financial landscape is key for flippers, especially in challenging markets. Learn more about your options with our guide on Hard Money 101.

Particularly for home flippers that flip multiple properties at the same time, many were stuck holding multiple homes they could not sell. This downward trend in prices has also hurt the hard money lenders that loaned to home flippers in 2022 and 2023. Many of these new and eager hard money lending funds loaned way too much on these homes. The high loan to value ratios on these properties prevented many home flippers from refinancing them with long term financing.

What does 2024 and 2025 hold for home flipping in the U.S.? Many expect interest rates to go down in 2024, which would unfreeze sales and may increase the number of home flips in 2024 and 2025. However, many experts remain pessimistic that rates will go down in 2024, given the booming U.S. economy and persistent inflation. But it’s more than interest rates that will affect the home flipping game in 2024, so stick around as I discuss some of the factors that I believe will make or break home flippers in 2024 and 2025.

The Evolution of the Fix and Flip Market

The Role of Media in Home Flipping Popularity

Introduction to Home Flipping
Home Flipping is a term used to describe purchasing a property and then reselling it for profit. The term “fix and flip” refers to fixing up a property, e.g. making repairs and improvements, and then reselling it for a higher price later. Home flipping went bananas in the years leading up to the Global Financial Crisis. The number of homes being flipped nationally was at a record level in 2005 due to easy credit terms and low interest rates.

As the market evolves, so do the financing options available to investors. Our Bridge Loans provide another avenue for those looking to navigate the gap between purchasing and selling properties

Regulatory Changes and Market Impact
In 2006, HUD created a new regulation which imposed a legal requirement that you must own a property longer than 90 days between purchase and resale in order for that property to qualify for a FHA loan. This requirement was pretty much removed in January 2010, which opened the floodgates again in 2011 when the number of homes flipped nationally began to increase significantly.

Media Influence on Home Flipping
After 2012, a number of television shows launched that glamorized home flipping. These Hollywood story versions of home flipping enticed a larger number of people into the fix and flip space. Shows like TLC’s “Flip That House,” and HGTV’s “Flip or Flop”, among a dozen similar shows, made home flipping seem so easy that anyone could do it.

The Hype and Reality of Home Flipping
Often understating their true project costs, and exaggerating profit margins, these shows hyped home flipping to another level. As a result, thousands of aspiring home flippers entered the home flipping market in 2015, which was another contributing factor to the increase in the number of homes flipped from 2015 to the peak in 2021. 

Education and Scams in Home Flipping
Prospective house flippers started to pour money into multilevel marketing programs like “Renatus” and real estate education platforms like “Fortune Builders.” In response, a flurry of real estate education seminar firms, such as “Nudge/Response Marketing,” sprung up, hoping to profit millions from those seeking the “insider’s track” to house flipping. With titles like “Power Flip” and “Flipping for Life,” scammers like Nudge/Response Marketing lured prospective house flippers into expensive seminars in order to upsell them on even more expensive real estate investing courses with price tags as high as $30,000!

Trends and Changes in Home Flipping Volume
The number of homes flipped nationally increased steadily from 2015 and reached record levels never seen in U.S. history by 2021. The number of homes flipped nationally in 2021 even surpassed the record levels achieved in 2005, right before the Global Financial Crisis. In the first quarter of 2022, the number of homes flipped nationally reached an all time high. As soon as interest rates started to increase in March of 2022, the number of homes flipped nationally has declined steadily into 2024.

Evolution of Fix and Flip Financing

Entry of Institutional Investors Impact on the Market

In 2016, institutional investors entered the single family home market in a major way. Since 2016, the percentage of single family homes purchased by institutional investors has increased every year. This has created competition for home flippers, who are far less capitalized as compared to deep pocketed, institutional investors. This has also contributed to low inventory levels of single family homes under $300,000. This is because institutional investors purchase lower priced homes to hold as rental properties, thereby removing them from inventory altogether.

Hard Money Lenders Saturate Lending Market and Expand Financing for Flippers

From 2017 to 2022, there was a rapidly growing number of newly formed, hard money lending companies that were setting up to lend to home flippers. Hard money lending funds like Temple View Capital, RCN Capital, Lima One, and others, were offering leverage of 90% of total project cost (purchase + rehab cost) during the boom time from 2017 to 2022. And even more lenders followed suit, resulting in a glut of fix and flip lenders from 2020 to 2022 that created an oversaturation in the fix and flip lending market. Fix and flip investors took advantage of the increase in capital availability, which fueled a fix and flip boom up to the peak in Q1 2022.

Increased Competition from Wholesalers
Along with the increase of fix and flip lenders, also came an increase in the number of real estate “wholesalers” who sell properties to home flippers at a profit. As more wholesalers entered the market from 2018 to 2022, competition among them increased. As a result of increased competition, wholesalers increased their profit margins from an average of $10,000 profit per property, to as high as $50,000, or more. In fact, many home flippers have complained that it’s been the ever-increasing profit margins of wholesalers in recent years that has devoured their profit margins.

The Emergence of iBuyers
And with the boom in home flipping, also came the notorious “iBuyers” who wanted a piece of the “fix and flip” pie. These were the internet based, fix and flip buyers, like Opendoor, Offerpad, RedfinNow, and Zillow Offers. iBuyers use internet based software to make instant offers to home sellers who had listed their homes online. Sellers received electronic offers to purchase from iBuyers with the promise of no hassle, fast closings.  iBuyers purchase properties and then “flipped” them for a higher price, exactly like a regular home flipper, but at scale. As the median home price nationally came down in 2022, many iBuyers were out of business overnight and found themselves holding thousands of homes that they could not sell for more than they purchased just a few months before. 

Challenges Facing Flippers and “Fix and Flip” Lenders

Impact of Rising Interest Rates on Home Flipping

When national home prices took a dive in 2022, many of these new, “fix and flip” lenders that were offering such high leverage got a reality check. So many of these funds were, and are, run by inexperienced fund managers who weren’t investing before the GFC, or run by overconfident ex-stock traders, that simply lacked the knowledge and expertise to float the boat in low tide. Many were just lending other people’s money, running amok, and making millions on the rising tide, never noticing that the tide was slowly going out. 

The Freeze in Real Estate Sales
Many of these funds were sitting ducks when real estate sales began to freeze up in 2022. For those hard money lending companies that obtained their funds from the secondary market, the rising cost of capital in 2022 was making them even less competitive in an oversaturated market.

Hardships for Home Flippers
Many of these lenders found themselves holding overleveraged loans on properties without an exit, because the properties weren’t selling. And because the loan to value ratios were so high, they could not find a refinance either. At the time this article was written, February of 2024, many of these same lender’s loan portfolios are in shambles due to a frozen real estate market. Loans made at 8% in 2021 that were supposed to be 12 month loans, ended up being 24 month loans in a rapidly rising, interest rate environment. 

For home flippers with homes that won’t sell, the interest on these hard money loans continues to pile up, making their situation worse. This will force many of them into foreclosure and their lenders will have to own the properties at levels where they won’t be able to recoup their interest, and in some cases, their principal. 

Persistent High Prices and Competition
Despite the escalating interest rate environment of 2022 and the first half of 2023, home prices nationally really didn’t go down very much during that time frame. It is not so much that we have a low inventory of homes for sale, it’s more that we have a low inventory of “affordable” homes for sale. Prices of single family homes are at the highest level in U.S. history, and higher interest rates for the past two years haven’t done a lot to change that in many areas of the country.

The Continued Struggle in 2024 and Beyond for Flippers

Persistent High Interest Rates and Their Impact
The elevated interest rate environment has dramatically decreased national home sales volume in 2022 and 2023, reaching lows at the end of 2023 not seen since 1995. This slowdown extended the duration of time from purchase to resale for fix and flip investors, leaving many with unsold properties acquired in the spring of 2023 and earlier. Despite these challenges, high home prices persisted, squeezing the profit margins of flippers for the foreseeable future.

Inflation and Interest Rate Outlook
With overall inflation still stubbornly high, particularly services inflation, the Federal Reserve doesn’t have any incentive to lower interest rates. And unless inflation gets under control in 2024, rates won’t go down. This means home sales volume will stay largely unchanged in 2024, and as a result, the number of home flips nationally may continue to decline in 2024. 

Rising Costs in Construction
The cost of construction, materials and labor, has not seen much deflation since interest rates began increasing in March of 2022. This has increased the cost basis for home flippers, further reducing their profit margins. In fact, besides wholesalers who are taking most of the meat off the bone for home flippers, the cost of building materials and labor is another factor that is eating up home flipper’s profit margins.

Increasing Competition in the Market and The Impact of Institutional Investors
Another challenge that home flippers face is more competition than ever before. I already mentioned the entrance of institutional investors into the single family home space that has created competition for home flippers. The higher interest rate environment of the past two years has not caused a massive flight of institutional investors away from the single family homes market, in fact, they are still a driving force of competition for home flippers. Institutional investors have reduced home inventory, which has been a factor that has kept home prices still at historically high levels, threatening home flippers profit margins. And with access to endless pools of capital, institutional investors could put many home flippers out of business in 2024.

Emergence of Newbie Flippers
The wave of real estate education platforms that appeared from 2018 to 2021 has produced thousands of newbie home flippers that are eager to get their first home flip deal under contract. The wave of newbie real estate investors has created a ton of new competition for experienced home flippers in recent years. 

The Role of iBuyers
Despite setbacks in recent years, iBuyers remain a formidable presence in the flipping market. Leveraging technology and substantial capital, they are able to swiftly make offers on properties, potentially outmaneuvering traditional flippers. As iBuyers continue to refine their processes and reduce operational costs, they are expected to capture an increasing share of the market, further escalating competition for independent flippers.

Maximizing Your Fix and Flip Success: The Power of Networking and Building Strong Relationships

In a highly competitive environment for home flippers, networking is more important than ever. Institutional investors and iBuyers don’t have access to local real estate networking where many deals are made. Examples are local real estate associations and clubs where real estate professionals gather to network, exchange deals, and make connections. It is in these environments where many fix and flip deals are found and made. As competition stiffens in the home flipping game, these local networking opportunities will be a crucial factor in a home flipper’s success. 

The most successful home flippers always cite “relationships” as a key factor in their success. Building strong relationships is key to finding and capitalizing on the best deals. Discover how real estate rehabbers can resell properties for a premium, showcasing the power of networking, in our detailed post here.

It’s the relationships with realtors, lenders, contractors, and other real estate investors that newbie competitors, institutional investors, and iBuyers simply don’t have. And it’s these key relationships that will make the difference in 2024 and beyond for those home flippers that stay in business, and those that don’t. 

Expanding Funding: Key to Home Flipping Growth

The Intensifying Competition Landscape
Competition will only grow more intense if interest rates do head downward in 2024 and 2025. Home flippers will be competing with, not only eager home buyers, but also, institutional investors, iBuyers, newbie real estate investors, cash buyers, and foreign direct investors with cash. 

The Crucial Role of Funding in Home Flipping Success
In order to succeed at house flipping in 2024 and 2025, real estate investors will need to be able to compete, and having funding is essential. Hard money lenders like me create that funding for home flippers. And with a glut of “fix and flip” lenders that have appeared since 2018, there is more funding available for fix and flip investors than ever before in U.S. history.

The Advantage of Diversified Financing Strategies
Home flippers that limit themselves to one lender, won’t be able to scale as quickly if the real estate market does unfreeze in 2024. Many sellers that wanted to sell, held off from selling in 2022 and 2023 because of higher interest rates. If rates do go down in 2024, a lot of pent up inventory may hit the market in a short period of time, and there may be more than one opportunity available at any given time. For home flippers with relationships with multiple hard money lenders, it will be much easier for them to scale and do more than one deal at a time. 

Navigating Seller Hesitancy in a Shifting Market
Even with potential rate decreases, the market may not instantly heat up. A “wait and see” approach from sellers, anticipating further rate drops, could maintain a lukewarm sales environment well into 2024. Flippers will need to navigate this uncertainty carefully, balancing the eagerness to invest against the risk of a sluggish market rebound.

Smart Strategies to Reduce Risks in Fix and Flip Projects

Skill in Evaluation and Cost Management
Experienced home flippers also have an edge on newcomers into the home flipping scene. They are able to evaluate an opportunity faster, determine costs of rehab more accurately, and take advantage of higher profit margins as a result. To be successful at home flipping you need to understand the market, neighborhood characteristics, and have relationships with both realtors and local contractors.

You also need to be able to keep your costs under control to maximize profits. Because beginner home flippers lack the experience, they will pay higher prices for homes, pay more to renovate the homes, and have less profits as a result. This will result in deterring many of them from continuing in the home flipping business, and will give even more of an edge to experienced home flippers.

Understanding the ins and outs of rehab loans is crucial for managing your investment and reducing risks. Find out how rehab loans work and how they can be a game-changer for your flipping strategy.

Balancing Flipping with Stable Employment
As home flippers gain more experience, they often fall into the trap of taking on too much. As a hard money lender to real estate investors, the biggest cause of failure that I’ve seen is taking on too much at one time. If one home doesn’t sell as quickly as anticipated, it can cause a domino effect for a home flipper that can lead to a rapid free fall.

In 2024, my advice to experienced home flippers is to find a day job and make home flipping a side gig until we can see that sales volume nationally has started to rebound.

Dynamic Pricing to Facilitate Sales
And for those home flippers who are holding flips in 2024 that are hangovers from 2023 (or even 2022), reduce the price until the home sells. That means, lower the price every, single day if that’s what it takes to get the house sold. Particularly for home flippers who have hard money loans on properties they can’t sell, they should cut their losses early and sell at a lower price rather than hold onto a property that costs them more for every day that they hold it.

Negotiating with Lenders
For those that are unable to refinance and hold the homes as a rentals because their hard money lenders gave them too high of leverage, they should consider negotiating with their hard money lenders for reduced loan payoffs so they can refinance.

Predicting the Winners in Home Flipping for 2024 and 2025

Advantage of Focusing on Median-Priced Properties
The most successful home flippers in 2024 and 2025 will be those that can purchase and rehab homes below or near the median home price. Homes priced under $350,000 are still selling quickly, and some for over asking price. However, this is the same home price category being targeted by institutional investors who want to buy and hold the lower priced homes as rentals. This is where local networking and relationships will give home flippers an edge on institutional investor competition. 

Cost-Efficiency in Renovation
Home flippers that know how to not “over-improve” a property for its target demographic will also have success stories in 2024 and 2025. This is because of the persistent inflation in construction materials and labor.

These items are at a premium, and with so much demand in the construction sector that has remained strong even in a higher interest rate environment, expect inflation in building costs to continue. For home flippers that correctly identify what their target demographic is looking for in terms of updates and improvements, they will save significantly on the rehab costs as compared with new market entrants.

The Role of Capitalization and Lender Relationships
The winners in 2024 and 2025 will be well capitalized and have good relationships with multiple hard money lenders. Institutional investors have unlimited access to large amounts of capital, and can pay cash for properties. In order to compete with them, home flippers need to be well capitalized.

Reconsidering High-End Flips
Home flippers that target luxury home flips of $750,000 and above will continue to suffer in 2024 and 2025 as they have done in 2022 and 2023. In many U.S. cities, in response to the pandemic migration trends, home builders created a glut of homes priced over $1 MM.

This means that home flippers who targeted luxury home flips have been competing with new construction homes over the past several years. And because many of these new construction, luxury homes are still sitting on the market as we enter 2024, luxury home flippers will continue to compete with brand new builds. Bottom line, home flippers who are considering getting into luxury home flips in 2024 should probably think again. 

Upcoming Trends in Home Flipping: What to Expect

iBuyers’ Impact on the Fix and Flip Market

Targeting affordable homes for renovation is a trend that will yield high margins for home flippers in the coming years. One example is flipping mobile, or manufactured, homes. This requires skill in carpentry and improvisation, but given the lower price point of the finished product, there will be a steady demand for these affordable homes. 

Home flippers also may need to change their business models to survive if the real estate market stays frozen, margins stay razor thin, and competition remains high. For example, changing the business model from a “home” flipping business, to a “property” flipping business. Properties that can be rented by workers, veterans, or members of an aging population are in high demand. One example of a “property” flipping business model is the conversion of a motel into an affordable housing property for local workers. Once the property is renovated and rented out, a flipper can sell it for a profit to a long term hold investor. 

Wrapping Up: Key Insights for Future Home Flipping Success

Recap of the Boom Years
The fix and flip market thrived from 2015 to 2022, buoyed by factors such as low interest rates, an abundance of funding options, increased competition, the rise of iBuyers, widespread real estate investment education, and the media’s glamorization of flipping.

Challenges Since 2022
The landscape shifted in 2022 with rising interest rates leading to a significant decrease in home sales volume. This slowdown has left many flippers and their lenders with unsellable properties, directly impacting profit margins.

Impact of Market Conditions on Profits
The number of homes being flipped in the U.S. has been on a steady decline since 2022 when interest rates started to go up. An extremely low volume of home sales has prevented home flippers from moving properties quickly. As a result many home flippers, and their lenders, are holding properties that cannot be sold or refinanced.

And then profit margins of home flippers have been eaten into by a variety of factors including the increase in the number of, and profit margins of, wholesalers, inflation in the cost of construction materials and labor, and the longer holding times which require more interest to be paid on the underlying hard money loans. 

Strategies for 2024 and Beyond
If rates do go down in 2024 and 2025, home flippers need to be well capitalized as compared to their competitors. This will allow them to not only compete with buyers with deep pockets, but will also help them scale their businesses faster if the opportunities arise.

Adapting to Market Realities
If interest rates stay at 2023 levels for most of 2024 and 2025, home flippers should consider targeting affordable homes to remodel and stay away from luxury home flips. They may even consider changing their business models from home flipping to property flipping. 

Diversification of Funding Sources and Managing Costs
Success will likely favor those who diversify their funding sources, manage construction costs efficiently, and refrain from over-improving properties.

Building Strong Networks
Establishing and nurturing relationships within the real estate community will enhance competitiveness against iBuyers and institutional investors, providing a strategic advantage in the evolving market.

Ready to dive into your next fix and flip project but need financial guidance? Don’t hesitate to contact us for personalized advice tailored to your unique investment needs.

Copyright © Corey Ann Dutton, Private Money Utah, Wolf Creek Mortgage, Inc. This content may not be reproduced in any form without the explicit, written permission of Corey Ann Dutton.

Inside Our Hard Money Loan Evaluation Process

Key Takeaways

  • Understanding the basics of hard money loans is crucial.
  • A fast evaluation process helps real estate investors and others achieve their goal of a speedy loan closing and funding.
  • Legal compliance and detailed documentation are non-negotiable.


In the fast-paced realm of real estate investing, getting funding on time is critical for your success. That’s why so many real estate investors depend on hard money loans. Hard Money Loans from Private Money Utah are approved quickly with fast funding so that real estate investors can pounce on real estate deals that won’t last long.

But how do we review real estate deals for viability and evaluate risks as the basis for our lending decisions? 

Let’s talk about our loan evaluation criteria for our hard money loans so you can understand how this hard money lender approves and declines loans.

Understanding the Basics of Hard Money Loans

What Are Hard Money Loans?

Unlike conventional loans, hard money loans are primarily asset-based loans, which is one factor that helps expedite the approval process. Hard money loans get their name from using hard assets as collateral such as real estate.

What Type of Borrowers Use Hard Money Loans?

There’s a common myth out there that only desperate or bad credit borrowers are those willing to pay the higher interest rates typically associated with hard money loans. But this couldn’t be further from the truth! In fact, there are so many reasons that people use hard money loans, in fact, some may surprise you. Discover the many reasons why people get hard money loans in greater detail here, and see how many of these reasons turn out to surprise you! 

Our Evaluation Process- How we look at a real estate deal

Our evaluation process for a loan is:

  1. Borrower and/or other third parties provide information about the property being used as collateral for the loan and the borrower.
  2. We review all of the information provided by the borrower and other third parties. We verify that the information is accurate.
  3. After we’ve reviewed all of the information and documentation for the loan file, we do a risk analysis to determine if the level of risk is acceptable.
  4. Once we’ve determined if the level of risk is acceptable, then we price that risk and present the final loan terms to the borrower. 

The subsequent sections will go deeper into the evaluation criteria, legal compliance, and other facets of our due diligence process before approving a loan. For a sneak peek into some real estate deals evaluated and funded by us, check out our Recent Loans Closed section.

Real Estate Deal Evaluation Criteria: The 5 Cs

The 5 Cs are the criteria that make up our evaluation framework in order to fund a hard money loan. The 5 Cs are: Collateral, Character, Cash, Credit, and Cybersecurity.


Property Use: A thorough review of the property that will be used as collateral for the loan is one of the aspects of asset based loans. The borrower must be ready to provide all of the available information about the property to the lender, including some information that may not be readily available.

Understanding the zoning laws and land use regulations is essential for any lender before lending on a property.

Is there an HOA that regulates property usage? Is the property located in a special district, etc.? Is there a factor about the location that will make the property less desirable? Is there access, or is some sort of easement required? These are just a handful of aspects about the property that a lender looks at when evaluating a loan opportunity.

Property Value: Do the numbers work?

      1. Loan to Value (LTV) Ratio: This crucial metric mirrors the loan amount against the value of the property, or the purchase price, whichever is lower typically. Most hard money lenders lend a certain percentage of the purchase price for a property on purchases, rather than on the appraised value. Because every hard money lender is different, find out what your lender’s max LTV is on purchases and on refinances.
      2. BPO of value versus a Professional Appraisal: Hard money lenders use a variety of methods for valuing a property. Depending on the complexity of the loan, or if a lender doesn’t understand the market well, a lender may choose to go with an appraisal to determine a value for the property.  However, if a lender understands the market well, or needs to close the loan in a hurry, a lender may opt for a Broker’s Price Opinion, often called a “BPO,” to determine a value for the property.  But it’s not as easy as just ordering an appraisal or a BPO. A lender really needs to analyze the report, talk to real estate professionals, and run the numbers, especially on income-producing properties.
      3. Purchase Price Evaluation: If the loan is being requested for a purchase, we must analyze the purchase price against the as-is value of the property. Is the asking price for the property based on its future, intended use? Or is it based on a future value or future rents? If the borrower is paying a lot more for a property as compared to its as-is value, the borrower may need to bring in a larger down payment.  This is because a lender may not be able to rely on a future value given that it requires the work of the borrower to achieve the future value. And if the borrower doesn’t take the action required, there may not be a future value that a lender can count on.Cap rates are something to factor in as well, particularly on a purchase of an income-producing property.
      4. After Repair Value (ARV) and As Completed Value: Typically for Fix and Flip Loans, and construction loans, the “ARV,” or the “As Completed Value,” provide a future property value after repairs are made, or after construction is completed.  Loans that rely on a value at a date in the future, are always higher risk, so a lender must consider all of the potential risks to achieving a future value and how those additional risks can be mitigated.

Ensuring a Clear Title: A thorough title search is imperative to ascertain that the property is free from any liens or litigation. 

Access to Water: Particularly in drier states, water is very important in real estate, so always make sure the property has a source of water, unless the property is on city water. And if a well is required, does the property have a well permit in place, and if not, are permits available in the area where the property is located?

Character: Borrower’s Experience with the Property Type & Track Record 

Evaluating the borrower’s character is not what it seems on the surface. We are not looking at personality traits or moral standards, we are looking at the borrower’s experience, track record, and history.

The questions that should be asked include: Does your borrower have real estate investing experience with this particular property type that is being used as collateral for the loan? Can your borrower carry out the type of project being proposed?

Does your borrower have the track record and experience that can be relied upon?

Cash: Borrower’s Financial Assessment

While the primary focus is on the property, understanding the borrower’s financial standing provides a larger picture of the risk involved. Higher risk doesn’t mean a loan will be declined, but the final interest rate or fees may reflect a higher risk.

Down Payment or Cash Equity: What size down payment is the borrower bringing in on a purchase? If it’s a refinance how much cash equity does the Borrower have in the property?

Cash Reserves: Does the borrower have adequate cash reserves to cover any unforeseen circumstances that may occur? For example if it’s a construction loan, or renovation project, does the borrower have reserves to cover budget overruns? ”

Number of Projects in Process: How many other projects does your borrower have going that require cash outlay? If a borrower has several other projects or businesses that may require more cash outlay, a lender may be hesitant to do a loan.

Having too many projects going at once that all require cash outlay by a borrower is a red flag because it indicates that a borrower may find him or herself in a cash crunch position.


Most hard money and private money lenders lend to borrowers with poor credit, and many of them do not have a minimum credit score requirement. However, many lenders will require a credit report to mitigate fraud. In higher risk loan transactions, such as value add real estate deals, or construction loans, credit may become a more important factor in loan approval.

Cybersecurity & Fraud:

There are several areas to a loan transaction that can invite fraud. Since everything is done digitally and online these days, it has become harder to prove identities of borrowers. When evaluating a loan opportunity, a lender must be aware of identity theft, whereby someone impersonates a real person and attempts to obtain a loan in that person’s name. A lender must have cybersecurity measures and fraud prevention procedures in place to avoid becoming a victim of this type of fraud.

Additional Risk Factors Hard Money Lenders Consider: 

Legal Compliance:

Adhering to State and Federal laws with your lending practices is crucial to managing risk. Are you complying with usury laws in the jurisdiction where you are making loans? And then what are the disclosure requirements for the type of loan you are making? Do you have to comply with certain standards based on occupancy status, or property use? 

Market Conditions:

Evaluating both the current market conditions and the expected future conditions helps in understanding the potential growth or potential depreciation of the property’s value.

Where are you in a real estate or market cycle? Are interest rates expected to go up, and if so, what interest rate and for what term would be appropriate for a given loan? Are there a lot of properties for sale at the same target price point that your borrower is planning to resell a property you are loaning on?

Exit Strategy: How will you pay the hard money loan back?

Assessing the borrower’s exit strategy—whether it’s selling the property or refinancing—and testing the viability of that exit strategy is critical. What is the borrower’s plan for paying the loan back, and is that a viable plan? Always ask your borrower for a secondary or tertiary exit strategy. Sometimes other information will be required to determine if the borrower’s exit strategy is viable, particularly if the exit strategy is a refinance. If a borrower has poor credit or not enough cash equity, the chance of a refinance as an exit strategy lessens.

Changing State and Local Regulations:

Are there any pending state or local regulations that could affect the property, or the future property use? For example, if the property is a short-term rental, will pending regulations affect the property use in the future, and if so, how will this affect your exit strategy on the loan?

Environmental Considerations:

Does this area have any known environmental issues? Is there a property nearby that could pose future environmental problems such as proximity to a dry cleaners, automotive repair shop, a printing shop, etc.? If the property is located near to a property that has created environmental contamination, it may have also been contaminated.

Changing Flood Maps:

Lenders use flood maps to determine whether flood insurance is required. However these maps are not meant to be predictive and lenders considering whether flood insurance should be required should take into account the overall flood risk to the property. “Maps do not forecast flooding. Maps only reflect past flooding conditions and are a snapshot in time. They do not represent all hazards and do not predict future conditions,” said Michael Grimm, former deputy associate administrator of FEMA’s Federal Insurance and Mitigation Administration.



Grimm also identified the challenge when it comes to mapping flooding from intense and heavy rainfall, which seems to be a by-product of a warming climate.

Grimm said. “What the maps right now are mainly covering are that coastal flood hazard and the riverine flood hazard for larger riverine watersheds. We know that as climate changes, the impacts are getting worse. We’re seeing more and more flooding going on as a result.”

FEMA is required to review a community’s flood maps every 5 years and then decide whether to update them. Insurance rates may change once a flood map change becomes effective. This is a growing concern for lenders as flood maps across the U.S. are changing, or soon to be changing.

Properties that were once located in 500-year floodplains could be named 100-year floodplains. And properties that weren’t previously at risk of flooding are now at risk due to improper drainage infrastructure of the city where the property is located. 

Insurance Availability:

With a changing climate comes also changes to insurance requirements. Some locations that are insurable now may in the future come with higher priced premiums, or become uninsurable altogether.  If you’re doing a refinance, how likely is it that a property you’re lending on may be uninsurable sometime in the future? If you’re loaning on a flip, or new construction, how will the cost and availability of insurance affect the resale of the property?

Lenders will begin to redline certain locations based on the availability, or not, of insurance as the effects of climate warming are fully realized.


A lender must take a disciplined and methodical approach when evaluating a hard money loan opportunity. Because there are so many factors to consider when making a loan, potential lenders should not be lured by the promise of superior returns. This naive approach to private money lending can present some fairly predictable pitfalls that most certainly will turn to losses. 

A property loan is extremely complex because a private money lender must have an understanding of many aspects of the property being used as collateral for the loan, as well as the borrower. A lender must fully understand the legal and regulatory framework, the current and future market conditions, just to name a few. Many private money lenders fail to look at the forest for the trees, as the familiar saying goes. New and inexperienced lenders become so focused on the trees, AKA the loan opportunities, that they fail to see the forest around them. 

For a deeper understanding of hard money loans, check out our Hard Money Video Resources and the Recent Loans Closed section of our website.

Deal Evaluation FAQs

What is a Hard Money Loan?
A hard money loan is primarily asset-based financing provided by a non bank lender.

How quickly can a Hard Money Loan be approved?
Loan approval can be expedited, often within a few days, provided all necessary information is submitted to the lender.

What is the Loan to Value (LTV) ratio in Hard Money Loans?
The LTV ratio is a metric that reflects the loan amount against the value of the property.

What is the significance of the After Repair Value (ARV)?
The ARV is the future value of a fix-and-flip property after renovation.

Are there different types of Hard Money Loans?
Yes, including Fix and Flip Loans, Bridge Loans, and Commercial Bridge Loans.

Utah Real Estate Unveiled: An Investor’s Guide


Real estate investors who are considering real estate investment in Utah often ask, how do I get started? or, what are the best cities for real estate investment in Utah?

Investing in the Utah real estate market requires research and planning on your part if you want to be successful. And the same thing goes for investing in any new market. In this article I’ll give you some insider tips for successful real estate investment in Utah. As a real estate lender, not only do I review new Utah real estate investment opportunities weekly, but I have a comprehensive knowledge of the Utah real estate market as a whole.

Utah’s economic growth and stability, combined with a growing population, are the primary reasons that real estate investors are investing in the Utah real estate market. In this Utah real estate investing guide, I will provide a general overview of real estate investment in Utah to help you decide if it’s for you.

I will start with a few key factors that make investing in the Utah real estate market an attractive choice for real estate investors. I will also point out a few factors that deter real estate investors from entering the Utah real estate market. I will discuss the best cities for real estate investment in Utah. And then finally, this guide will help you identify a few legal considerations for real estate investment in Utah.

Overview of Real Estate Investment in Utah

Utah’s Economic Growth and Stability

Utah’s economy has seen explosive population growth since 2010 and it spiked right after the pandemic in 2020. With its rapid population trajectory, combined with the current lack of affordable housing, many out-of-state investors have been drawn to real estate investment in Utah.

Utah had the lowest unemployment rate in the nation in 2022, due in part to a regulatory environment that is favorable to small businesses. The low unemployment rate and favorable business climate have spurred all sorts of new real estate investment in Utah. 

Real estate investors are also able to diversify within the Utah real estate market by investing in different property types such as: storage units, residential land development, and short term rentals.

Benefits of Investing in Utah’s Real Estate Sector

Investing in the Utah real estate market offers numerous benefits for real estate investors. Utah is landlord-friendly as compared with California which is tenant-friendly. 

Demand for housing in Utah has been steady since 2010 with low vacancy rates. Property values have also seen steady appreciation since 2010. The real estate market in Utah shows promising forecasts for future growth too, which provides real estate investors the potential for above average returns.

Analyzing Utah’s Real Estate Market

Identifying Promising Areas for Investment in Utah

Utah has several geographic areas that have strong population growth projections, which point to an increasing demand for housing. Some of these geographic areas include, Tooele County, Summit County, Morgan County, Emery County,  Weber County, Cache County, Duchesne County, Washington County, and Grand County.

Property Types and Market Demand

Because each of these geographic areas has its own unique factors, and also because there are a diverse range of property types to choose from, you really need to decide “where” and “what,” before you make any real estate investment in Utah. 

For example, some of the areas I’ve listed are tourist destinations, so real estate investors who are focusing on short term rentals would start by looking in those areas. Some areas in Utah are still very rural and have low housing inventory, but projections show future growth. These areas will attract real estate investors who are targeting all property types including fix and flips, long term rentals, or residential spec construction. 

By carefully researching the different geographic areas in Utah and measuring current and future market demand, a real estate investor can determine if a particular property type would be a fit for that area. For example, in a city with a large number of apartment complexes, a self storage facility may be a desirable property type in that city.

Utah Rental Market Analysis

The rental market in Utah is driven by the factors already mentioned including: population growth, job opportunities, and a robust tourism industry. By obtaining a thorough rental market analysis from a local real estate broker or property manager,  you can identify areas with high rental demand, areas with rental rates that cash flow, and areas with potential for rental income growth. 

Unfortunately for investors in long term rental properties, ever since 2016 when Utah property values really started to increase rapidly, rental rates didn’t rise as fast as prices. And then prices spiked, from the end of 2020 through the spring of 2022, making it even harder for investors in long term rentals to find properties with cash flow.  

At the time this article was written, it was difficult to find a rental property in Utah that cash flowed. For this reason, many real estate investors in Utah have purchased rental properties in recent years with the goal of future value appreciation, rather than with an expectation of cash flow.

Factors to Consider Before Investing in Utah

The Legal Considerations for Real Estate Investment in Utah

Before diving into real estate in Utah you must first have an understanding of the legal considerations for real estate investment in Utah. For example, the regulatory bodies that govern businesses and real estate in the state. The Division of Real Estate governs all things real estate and mortgage in Utah. And the Utah Division of Corporations governs all things business. Familiarize yourself with Utah real estate laws, its property ownership laws, landlord-tenant laws, and property management regulations. 

What individual name or business entity name will you be doing business in Utah under? Are you setting up a Utah business entity, or are you operating under a foreign business entity that should be registered in Utah? Consult with a CPA that understands your tax goals and can suggest the right type of business entity structure that would be best for you. 

Utah is in the top 10 states with the lowest property taxes. The Utah State Tax Commission is the entity where you file and pay your income taxes. Find a CPA that has experience working with real estate investors and can provide advice on tax strategies based on your specific real estate investment goals.


Additionally, explore any tax incentives or exemptions available for certain types of investments, such as historic properties or renewable energy projects.

A knowledgeable realtor in Utah is the type of advisor that can help you navigate Utah real estate investment opportunities. But consult with a real estate attorney on more complex real estate matters such as complicated contracts or partnership agreements, title, land, and development, are just a few areas where legal advice is essential. 

Short Term Rentals (STRs) in Utah are regulated in Utah all the way down to the local level. They can be regulated by the County, but in some cases it’s left up to the municipality, i.e. town. And then any short term rental may also be subject to the jurisdiction of the individual Homeowners Association (HOA) where the property is located. Always do careful research to make sure STRs are allowed at the properties you are targeting for short term rental investment purposes.

Financing Options and Strategies

How will you fund your real estate deals in Utah? To have multiple financing options is crucial for success in real estate investment in Utah and in any real estate market.

There are a variety of financing avenues for purchasing real estate in Utah, including traditional mortgages and hard money loans. But you must first figure out what your investment strategy is, and what your long term goals are for a property. Then take your goals to a good mortgage broker, or other seasoned financing pro. 

Corey Dutton, a private money lender based in Utah, is one of those seasoned pros who’s both a mortgage broker and a private money lender. Professionals like Corey can help you decide how you will fund your purchases of investment properties in Utah based on your short term and long term goals. 

The real estate market in Utah is competitive. Motivated sellers may sell properties at a discount but only to buyers with cash, or fast funding hard money loans. Unless you’re planning to come in and purchase with all of your own cash, you should consider getting preapproved with a hard money lending company before you start your search for real estate investment properties to buy in Utah. 

The best Utah real estate investment opportunities, like anywhere, never last long. In order to compete in a competitive real estate market, you need to be ready to purchase with all cash. But most real estate investors don’t have large amounts of cash on hand. For this reason, most real estate investors use hard money loans to purchase real estate investment properties and then either sell or refinance to pay off the loans. 

Hard money lenders in Utah are your best source for fast loan approval and funding to give you a competitive advantage. Make friends with a good mortgage broker, and a good hard money lender, in Utah. They can both give you advice on how to best finance your properties and accomplish your real estate investing in the Utah real estate market. A lot of traditional mortgage brokers don’t understand how private money loans work so make sure you also get to know a good hard money lender in Utah.


Top Tips for Successful Real Estate Investment in Utah

Build a Strong Network of Professionals and Team of Advisors

Seek the expertise of real estate agents, attorneys, and tax advisors who specialize real estate when investing in the Utah real estate market. They can guide you through the intricacies of local regulations, assist with property transactions, and ensure compliance with applicable laws. 

Collaborating with local real estate professionals can provide you with valuable insights when investing in any new market. Connect with local property managers, contractors, and title companies, lenders who have experience in the Utah market. They can provide not only guidance, but also potential investment opportunities. 

Building relationships with professionals ensures you have a team to support your investment journey in Utah that can help you navigate any challenges that may arise. How do you network with, and learn from, local real estate professionals? Consider joining a local chapter of any Utah Real Estate Investor Club, or local Real Estate Investor Association, there are several scattered across the major geographic areas in Utah. 

Understand Legal and Tax Considerations of Real Estate Investing in Utah

Having a solid team of professional advisors is key to your success. Real estate attorneys, experienced real estate brokers, and seasoned tax professionals are a few of the types of advisors that you need on your “team” to help you accomplish your goals in real estate investing in Utah. Without them, you are just finding information on the internet somewhere and trying to do it all yourself. Never cut corners or cheap out when it comes to the right professional advice.

Conduct Thorough Market Research

Thorough market research is the foundation of any successful real estate investment. Make sure you carefully analyze historical trends, that you evaluate current market conditions, and then make future projections of profits, income, etc. Your numbers work, or they don’t work. And if the numbers don’t work for what you want to do with the property, then move onto the next deal quickly. The sooner you make a decision to proceed with the investment property purchase or not, the closer you’ll be to the right one. 

In Utah, you need to look for areas with potential for job growth, city center initiatives favoring growth, and expansion of infrastructure. Identify neighborhoods or cities that show potential for appreciation from high rental demand. Whatever your exit strategy is for the real estate investment property, all of these factors play an important role in your success in a particular neighborhood or location.  

Implement Effective Property Management Strategies

Efficient property management is crucial for optimizing returns and maintaining the value of your investments. Whether you choose to self-manage, or hire a professional property management company, establish effective systems for tenant screening, rent collection, maintenance, and lease agreements. Good property management ensures a profitable operation by minimizing vacancies, and saving money where possible, while also staying on top of maintenance. 

Best Cities for Real Estate Investment in Utah

Salt Lake City: Growth Drivers, Investment Opportunities

Salt Lake County is where the capital, Salt Lake City, is located. Salt Lake City is one of the fastest growing cities in Utah for multifamily (apartment construction) in recent years. With several colleges and universities, and 3 ski resorts, Salt Lake City has seen a steady demand for housing over the past 10 years. 

If you can find a rental property in Salt Lake County at the right price where the rental numbers work, take it down. There are a lot of older, dated homes in Salt Lake City, which presents future opportunities for fix and flips or other value add plays. That is, if you can purchase the properties at low enough prices. 

Because of the high demand for housing in Salt Lake City, a recently renovated, well designed home can often demand multiple offers. Margins have been getting tighter in recent years with so much competition among real estate investors in Utah for both fix and flip, and rental investment properties in Salt Lake City, Utah.

Salt Lake County has a robust job market with a growing population. There has been a revitalization of areas of downtown Salt Lake City in recent years with the development of new residential and commercial. But many multifamily real estate investors wonder if the multifamily market is saturated with new inventory in Salt Lake City. 

If Salt Lake City is saturated with new construction and multifamily properties, maybe a better play is converting commercial properties to affordable housing, or workforce housing. Land prices are always a factor that real estate investors need to monitor in new development projects, especially when developing affordable housing or workforce housing. And with land prices at historically high levels in Salt Lake County at the time this article was written, these types of projects don’t prove as profitable as high density, multifamily projects. 

Park City: Tourism and Rental Potential

Summit County is renowned for its world-class ski resorts and vibrant tourism industry. It attracts visitors from around the world, offering excellent opportunities for vacation rental investments and second home ownership. Park City, the cash cow city for Summit County, hosts major events like the Sundance Film Festival and large scale summer events and festivals that draw visitors. For this reason, Park City made my list of the best cities for real estate investment in Utah. Additionally, Park City’s charm and natural beauty make it an appealing location for luxury residential properties for use as short term rentals, as fix and flip investments, or spec construction.

Provo & Orem, UT: Student Housing & Household Formation 

Utah County has been one of the fastest growing counties in Utah in recent years, and among the fastest in the nation. According to U.S. Census data, Utah County made the top 10 list of U.S. counties that saw the most growth during the pandemic.

Provo and Orem are two sister cities in Utah County that made the list of the best cities for real estate investment in Utah. These were two of fastest growing cities in the entire U.S. during the pandemic. 

Provo is home to Brigham Young University where student housing has been historically, very highly regulated. Changes to the BYU Student Housing Policy that went into effect in the fall of 2022, have opened up more opportunities for real estate investors near the BYU campus.

And then post graduation, college students in Provo and Orem want to stay locally and raise their families. For this reason, new family formation also drives the housing demand in Utah County. 

Lehi: Technology Industry Influence

The presence of a highly educated workforce and a culture of innovation both contribute to Utah’s economic growth. Lehi has a thriving technology sector, often referred to as, “Silicon Slopes.” Because of the rapid growth in Lehi, Utah in recent years, real estate investors can explore both residential and commercial acquisition and development.

Saint George, UT: The Migration Capital of Utah

There was a lot of migration during the 1st year after the COVID-19 pandemic started. And in 2022 U.S. Census data showed that one the metros in the U.S. that saw the most growth between July 1, 2020 through July 1, 2021 was Saint George, Utah. 

Saint George is not just a migration destination, but it’s also a destination for retirees because of its warm climate, and it’s also a vacation destination for tourists because it’s near 3 national parks. Because of its broad appeal, Saint George, Utah definitely made my list of the best cities for real estate investment in Utah.


Utah has landlord-friendly laws, low vacancy rates, and strong demand for housing that has been steadily growing since 2010. The real estate market in Utah shows promising forecasts for future growth too, which gives real estate investors an opportunity for future appreciation.

But to take advantage of Utah’s real estate investment potential you need a comprehensive understanding of your target counties and cities, and you need to decide what property types you plan to focus on. Whether your chosen property types are residential fix and flip, spec construction, long term rentals, land development, or commercial industrial, you need to know if there’s a demand for that property type in your areas of focus.

There are also legal considerations, tax considerations, and the need to find financing. And then finally, build a network in the real estate investing community in Utah and use a qualified team of professional advisors to guide your journey. 

Still thinking you want to do real estate investment in Utah? Reach out to us to discuss your real estate investment goals and we can help you figure out the best way to fund them.

Understanding DSCR Loans: A Real Estate Investor’s Guide

In the realm of real estate loans, DSCR loans have emerged as an excellent tool for real estate investors. My name is Corey Dutton and with many years in the real estate lending industry, I’ve gained extensive knowledge about various financing options that are available for real estate investors, including DSCR loans. This guide will help explain DSCR loans to you, while offering some insights for you in your journey to finance your purchases of investment real estate.

What is a DSCR Loan?

DSCR, stands for, “Debt Service Coverage Ratio.” This is a term, or type of loan, that is  specifically intended for real estate investors. But why are they for real estate investors? Unlike traditional loans that focus on your personal income for loan approval, DSCR loans have a different approach.

The income potential of the investment property is the driving factor for loan approval with these DSCR loans versus your own personal income. This means that if you have income from non-traditional sources, or if you write off a lot of expenses on your taxes and don’t have a lot of taxable income – – Well, you can still qualify for a DSCR loan on an investment property. 

Now, why is this so crucial? Imagine being an investor with a golden opportunity to snag a rental property, but your personal income doesn’t quite fit the traditional mold. In other words your personal financial metrics don’t align with traditional lending criteria. That’s where DSCR loans come into play. 

These DSCR lenders look more at how much the property itself will earn in income to cover the loan payments over time, rather than the personal income, or the net worth of the borrower. If you’ve snagged a good rental property and can make enough income from the property to support the loan payments, a DSCR loan may be a good fit. Let me tell you why.


What Types of Real Estate Can You Buy with a DSCR loan?

DSCR loans cater to a variety of income-producing properties including:

  • Single-Family Rental Property: This includes Single Family Homes, individual Townhomes, Condominiums, and even some manufactured housing.
  • Multifamily Property: Properties with more than one unit, from duplexes all the way to large apartment complexes.
  • Commercial Property: This includes retail, office, and industrial. Pretty much any commercial property that is income-producing.

Mixed-Use Properties: Buildings that combine both residential and commercial elements.

DSCR Loan Programs We Offer

We offer all types of DSCR loans for real estate investors for both the purchase and refinance of investment properties. Our DSCR loans cover a multitude of property types. A summary of the loan terms for our DSCR loan programs include:

  • Property types we lend on: income-producing property types from single family homes, to manufactured homes, from apartment complexes to industrial commercial properties. Most property types are considered as long as the property is income-producing.
  • Under 600 credit score ok
  • Loan amounts up to $50 MM
  • DSCR ratios from as low as 0.85
  • Loan terms: Interest only, 5 year and 7 year fixed, and 30 years
  • Competitive interest rates as compared with banks
  • Low points and fees

Benefits of DSCR Loans for Real Estate Investors

  1. Rental Income Evaluation:
    DSCR loans look at the property’s income potential more than the investor’s personal finances.
  2. Flexibility with Property Type:
    From manufactured or modular housing to multi-unit apartment complexes and beyond. DSCR loans adapt to various property types, freeing investors from traditional loan constraints.
  3. Credit:Even borrowers with low credit scores can qualify for DSCR loans. Some DSCR programs go as low as 580 credit score. But it’s worth noting that the lower your credit score, the MORE you’ll have to bring in down on a purchase using a DSCR loan.
  4. Perfect for the BRRRR Method of Investing:
    Real estate investors can build their real estate portfolios faster using the BRRRR Investment Strategy. Properties can be bought with hard money loans, rehabbed, then rented, and then refinanced with a DSCR loan. Real estate investors are then able to repeat this process over and over again, thereby building their real estate portfolios faster.

How to Calculate DSCR

So how do you know if a property makes enough income to qualify for a DSCR loan? It’s all about understanding the relationship between the income a property generates and the debt  owed on it. Let’s break it down, step-by-step, check it out:

  1. Determine the Net Operating Income (NOI) of the Property:
    Start by figuring out the property’s annual, net operating income. This is the total income the property generates minus its operating expenses. Remember, this doesn’t include any mortgage payments or other financing costs. In this example you will take out your property taxes and insurance as annual, operating expenses to arrive at your final NOI number. (Note: make sure not to include property taxes and insurance as part of the monthly loan payment, otherwise you would be double counting these expenses).


[  NOI = Gross Rental Income – Operating Expenses (incl. Taxes and Insurance)  ]


  1. Identify Annual Loan Payments:
    This is the total amount you’ll pay annually for the property’s debt, which includes principal and interest *(Note: In this example you are not including property taxes and insurance as part of the monthly loan payment).


[  Annual Debt Service = Monthly Mortgage Payment x 12 months  ]


  1. Calculate DSCR

Now, divide the Annual Net Operating Income by the Annual Debt Service. The resulting number is your DSCR or “Debt Service Coverage Ratio.”


[  DSCR = NOI  /  Annual Debt Service  ]


Example, if your property has an annual NOI of $120,000 and an annual debt service of $100,000, the DSCR would be 1.2. *(Anything over 1 is good, see below why it’s good).


Now what does a DSCR of 1.2 mean? A DSCR of 1.2 means the property generates 1.2 times more income than its debt. 


A DSCR of 1 means the property generates the same amount of the debt.  


And DSCR below 1 means the property is NOT generating enough income to cover its debt. 


Many DSCR loan programs require a DSCR of 1 or higher. If the DSCR is below 1, you can still get the loan, but you will be required to bring in a larger down payment or use your personal income to offset the difference between what your property is earning in income and your monthly loan payment.

What is a good DSCR for rental property?

In the realm of rental properties, the DSCR (Debt Service Coverage Ratio) plays a pivotal role in gauging financial health. A good DSCR for rental property typically hovers around 1.2 to 1.4. This means that for every dollar of debt, the property generates $1.20 to $1.40 in income.

However, it’s worth noting that while a DSCR of 1 indicates break-even, anything below 1 can be a red flag, suggesting potential income shortfalls. If there’s not an opportunity to increase income on the property, it may not be a good investment. As always, individual lender preferences can vary, but aiming for a DSCR north of 1.2 can keep your down payment requirement lower, and keep your personal income out of the equation entirely.

Real-World DSCR Scenario: The Case of Emilio’s Rental Property

Emilio, an ambitious real estate investor, had his eyes set on a rental property in a growing part of town. The property gets monthly, gross rents of $1,600. But Emilio’s personal income, derived from being a subcontractor, is inconsistent. Emilio writes off a lot of his expenses so his taxable income is close to zero. Traditional lenders were hesitant to approve him for a loan to purchase an investment property because his personal income is so inconsistent.

Income Potential:
The property’s potential gross rental income is $1,600 per month or $19,200 annually. After accounting for operating expenses like hazard insurance, utilities, property management fees, and property taxes, the annual, Net Operating Income (NOI) comes down to $15,360.00 annually.


Loan Details:
Emilio needs a loan of $175,000 on the property. The terms offered by a DSCR lender are: 7.5% interest rate with a 30-year term, fixed rate, principal and interest payments. This translates to an annual debt service (principal + interest) of $14,683.56 *(excludes impounds for taxes and insurance).


DSCR Calculation:

Using the DSCR formula, Emilio calculated his ratio: DSCR = NOI / Annual Debt Service

$15,360.00 / $14,683.56 = 1.04


The DSCR in this example is 1.04

A DSCR of 1.04 is a good sign. It means that the property is earning more in rental income than the debt. Another way to look at it, is for every dollar of debt, the property could generate $1.04 in income.

The DSCR lender that Emilio is talking to has a DSCR requirement of 1 for the loan amount he’s requesting of $175,000. This means that Emilio will qualify for the DSCR loan for this rental property because the DSCR is slightly over 1 at 1.04. The lender is not concerned about Emilio’s fluctuating personal income because the rental property has a DSCR over its requirement of 1. Emilio purchased the property in under 10 days using a hard money loan. Once he had the property rented, he paid off (refinanced) the hard money loan with a DSCR loan. 

This scenario shows the power of DSCR loans, but it is also a good example of how real estate investors are using the BRRRR method of real estate investing. delve deeper into the BRRRR method. Real estate investors like Emilio who are building their real estate portfolios typically use hard money loans to purchase properties quickly because a hard money loan can resemble cash transactions. Once the properties are rehabbed and rented, real estate investors are able to refinance the hard money loans into 30 year loans based on the rental income, rather than based on their personal incomes.


FAQs on DSCR Loans

Who Offers DSCR Loans?

Traditional Bank Lenders:

Yes it’s true, traditional bank lenders do offer DSCR loans. Banks tend to advertise these loans as “investment” property loans. Although DSCR loans from banks take awhile to fund so don’t think you can use a DSCR loan from a bank to purchase a property quickly.

If you have all the time in the world to close on the purchase of an investment property, a DSCR loan from a bank could be an option. But normally, sellers of investment properties want to sell as quickly as possible, especially if they are selling properties at good prices. The role of hard money loans in swift aquisitions. A hard money loan is typically used for the purchase of the investment property, which is later refinanced by a bank loan.


Credit Unions:

Similar to banks, credit unions also offer DSCR loans to real estate investors. Although sometimes faster than a bank, credit unions are still very slow in underwriting and funding loans. So if you want to purchase a property quickly, a hard money loan is your best bet. But make sure to talk with a loan officer at your credit union before you complete the purchase to make sure you understand all of the requirements for refinancing and can meet those requirements. The importance of a planned exit for hard money loans because hard money loans are short term loans of usually one year, with higher interest rates as compared with traditional loans.

Specialty Finance Companies:

These are lending firms that specialize in niche financial products and DSCR loans are often in their long list of loan offerings. Most of them are found online and are more of a broker, or loan wholesaler, rather than a direct lender. 


What Are the Downsides of a DSCR loan?

Some real estate investors might find the loan terms of a DSCR loan less favorable as compared with a traditional bank loan. Firstly, they often carry higher interest rates compared to traditional mortgages. Secondly, the loan approval process can take a long time, with lenders evaluating the property’s income potential by ordering appraisals which can often be very slow.

This means it’s very difficult to use a DSCR loan for a property purchase because it’s just not a fast process to get to the finish line on a DSCR loan. If you need to move fast to close on an investment property you would typically use a hard money loan for the purchase and then refinance later with a DSCR loan.

Other downsides are the shorter, fixed rate, loan terms often found in DSCR loans, which means the rate may only be fixed for 5 to 7 years. DSCR loans may also come with prepayment penalties, for example, some with up to 5 year penalties.

This means if you have a high interest rate DSCR loan, and then rates suddenly go down, you’re stuck holding the DSCR loan for 5 years because it has a 5 year prepayment penalty on it. If you pay it off in under 5 years, you have to pay a penalty, and sometimes a very stiff penalty.

And another downside of a DSCR loan is the larger down payment requirements as compared with traditional bank loans. Credit plays a factor in how much down payment you will be required to bring in on an investment property purchase when using a DSCR loan. For example, if you have a credit score below 650, you may be required to bring in a 25% down payment on a DSCR purchase loan.

If you have bad credit and are considering DSCR loans, make sure you understand how your credit score will affect your required down payment. Also if you have a low credit score, find out the loan amount you can get approved for if you’re planning to refinance a hard money loan with a DSCR loan.

Can a DSCR Loan be Owner Occupied?

Traditionally DSCR loans have been the go-to loans for non-owner occupied properties. However, the landscape of lending is ever-evolving.

While it’s less common, some lenders have started offering DSCR loans on properties that are only partially owner-occupied. For example a multifamily property like a four plex, whereby the owner occupies one of the units and rents out the other four units. As always, make sure to check with each individual lender, as the requirements and conditions can vary greatly among DSCR lenders.

Does DSCR include Property Taxes and Insurance?

This concept is a super important thing to understand so don’t skim over this section! When calculating your DSCR, or Debt Service Coverage Ratio, it’s essential to understand what operating expenses are factored into the calculation.

Typically, the DSCR calculation focuses on the annual Net Operating Income (NOI) of a property, which is rental revenue for the year minus operating expenses for the year. In the previous example described above, operating expenses did include property taxes and insurance.

Please note in the above example that property taxes and insurance are not included in the debt payment total. In the above example, the DSCR lender only requires principal and interest payments, the lender does NOT require insurance and taxes to be included in the monthly payments.

On the flip side, some lenders will include the taxes and insurance in the monthly payment amount. This means you will pay these expenses as part of your total monthly payment. In other words, you would pay principal, interest, a portion of property taxes for the year, and a portion of the insurance for a year as part of your monthly payment.

If a DSCR lender does require that you escrow the property taxes and insurance, make sure not to count them as operating expenses.


What’s the Down Payment Requirement for a DSCR loan?

As with any loan, the question of down payment is usually the first question. While the traditional amount for conventional mortgages is typically a 20% down payment, DSCR loans can have higher down payment requirements.

This is where credit score and loan size come into play. Typically the lower the credit score of the borrower, the higher the down payment requirement. And likewise, the higher the loan amount over $1 MM, the higher the down payment requirement.

For example, a borrower with a 750 credit score borrowing under $1 MM can get away with only a 20% down payment. While a borrower with a 575 credit score borrowing under $1 MM would need to bring in 35% down.

But what if you have a good credit score of 750, but you’re wanting to borrow $2 MM?
Most DSCR loans over a $2 MM loan amount, even with good credit, require a down payment of 35%. That’s a sizeable down payment if you’re not expecting it! And those with credit scores below 650 may not qualify AT ALL for a DSCR loan with a loan amount over $2 MM.


DSCR loans are a great tool for real estate investors to use for building their real estate portfolios over time. DSCR loans go off the income potential of the property for loan approval rather than going off of your personal income for approval.

This means you can hold multiple properties in your real estate portfolio for between 5 to 30 years using DSCR loans. However, because DSCR loans are typically slow to fund, you can get away with using a hard money loan to purchase an investment property quickly and then refinance with a DSCR loan.

And some DSCR lenders allow your credit score to be below 600, so you don’t need excellent credit to qualify. But be aware that the lower your credit score, the larger the down payment requirement on a purchase with a DSCR loan.

And on a refinance using a DSCR loan, the lower credit score you have the lower the loan amount you can qualify for. This means, you should take your credit score into consideration when looking at DSCR loans for the purchase or refinance of investment properties.



Private Money Loans: The Secret Weapon for Real Estate Investors

Navigating Your Real Estate Investment Funding Options

When you decide to invest in real estate, the burning question is, how will you get the money to purchase real estate investments?

When purchasing real estate investments, what options are out there for you to get funding? Sources of funding to purchase investment properties include: cash on hand, money from a partner, funding from a Retirement Account, a 1031 exchange, etc. These are just a few funding options for the purchase of real estate investment properties.

Most real estate investors purchase real estate investment properties using loans. The most common type of loan that real estate investors use to purchase investment properties are called private money loans, or hard money loans. A private money loan, or hard money loan, is a loan from a non-bank source. The words, private money and hard money, are words that are used interchangeably in this article to mean the same thing. There’s a debate whether hard money and private money actually have different meanings which I explain in an older article.

Most people, unless they are real estate investors, have never heard of private money loans for real estate investing. Even though these loans aren’t widely known, private money loans tend to be the top choice for real estate investors to purchase real estate investment properties.

Uncovering Your Primary Needs in Real Estate Financing

Every borrower is looking for the lowest cost funding option to purchase real estate. If you ask people what their biggest need is when it comes to funding for real estate, most will tell you it’s the lowest interest rate they can get. But most of the time, the lowest cost loan option is a bank or credit union.

The challenge with bank loans is they take a long time to close, usually between 3 weeks to 6 weeks. In a competitive real estate market where good real estate deals sell quickly, the biggest need of a real estate investor is actually the speed of funding, and not the lowest interest rate. What good is a super low interest rate from a bank if it can’t close in time for you to buy a property?

The Advantage of Private Money Loans to Meet Investor Needs

Because a real estate investor’s biggest need is usually speed of funding, most will choose private money loans to fund their real estate investment purchases. A cash offer has a higher chance of being accepted by a seller because it promises a faster closing than an offer with bank financing attached. Buyers who rely on bank financing tend to close a lot slower on a purchase, which is why sellers prefer cash offers. Only private money loans can close as fast as cash. This is the primary reason that real estate investors use private money loans to fund purchases of investment properties.

Expanding Your Real Estate Empire Swiftly with Private Money Loans

Another reason real estate investors use private money, hard money loans is because they are able to scale their real estate portfolios faster. What is a portfolio? It’s a bunch of real estate you own, like houses, apartments, warehouses, etc., that you are holding and renting out long term for rental income. If a real estate investor only uses available cash on hand and bank loans, it could take a long time to build a real estate portfolio. Here’s more detail on why hard money loans can help a real estate investor scale a real estate portfolio faster.

Some vacant properties won’t even qualify for bank financing, even if a real estate investor has excellent credit and income. Private money and hard money lenders will lend on vacant properties. This allows real estate investors to buy them, rent them out, and then resell them or hold onto them long term. This is how private money loans can help real estate investors to buy using the BRRRR method of real estate investing. 

Private Money Loans vs. Conventional Loans: Understanding the Difference

What are the primary differences between a private money loan and a conventional, bank loan?

  • A private money loan has a faster closing timeline that mimics a cash close. Private Money Loans can fund in a week or less, whereas conventional loans can take 3-6 weeks to fund.
  • Private money loans have less requirements and less paperwork needed to qualify. Often there’s no minimum credit score. Bank loans require a ton of documentation and have a minimum credit score to qualify a borrower.
  • Private lenders accept various property types to be used as collateral for a loan, whereas banks tend to be rigid on what property types they will lend on.
  • At the time this article is written, interest rates for private money loans tend to be priced in the range of 10% to 12%, whereas interest rates for bank loans tend to be below 8% for borrowers with good credit scores.
  • The loan terms of private money loans are shorter than bank loans. Usually hard money loans come with loan terms of 12-24 months. Bank loan terms, with the exception of car loans, tend to start at a minimum of 5 years to as long as 30 years

The Ease of Qualifying for a Private Money Loan for Real Estate Investment

Qualifying for a private money, hard money loan is a lot easier than qualifying for a bank loan. Why is getting a private money loan easier than getting a bank loan? Here are a few reasons:

  • There are no minimum credit score requirement with most hard money lenders, so you don’t need good credit to qualify in most cases.
  • There is no income requirement whereby you need to make a certain amount of monthly income to qualify.
  • You don’t need to have experience in real estate investing to qualify for a hard money loan on a real estate investment purchase.
  • The property you want a loan against doesn’t need to be in good shape or already rented to qualify, in fact many hard money lenders lend on properties that need repairs.

The Hunt for Private Money and Hard Money Lenders

In order to get started in real estate investing, you need to find some good hard money lenders. Find your lenders before you start looking for properties to buy. Get to know the general requirements of each lender and learn how to compare among lenders to know what lender is right for you. How fast will you need funding? Can the lender fund in that timeframe you need? It’s so important to get pre approved with at least one hard money lender before you start looking for a real estate investment property to buy.

Taking the Leap: Securing Pre approval and Starting Your Property Search

In a real estate market with a lot of competition among real estate investors, a bank loan or other conventional financing just won’t be fast enough. Private money loans tend to be the fastest loans out there when it comes to purchasing real estate investments. These types of loans have also helped real estate investors build their multimillion-dollar real estate portfolios faster than they would have done without them. If you’re serious about making real estate investments in the future, get to know your private lenders out there like us.

Private Money Loans FAQs:

What is a private money loan?

A private money loan, also known as a hard money loan, is a type of loan provided by non-bank entities. These loans are popular among real estate investors for their flexibility and quick closing times. The term, “Private Money Loan,” is often used interchangeably with the term, “Hard Money Loan,” to mean the same thing.

Why should I consider a private money loan for my real estate investment purchases?

Private money loans offer speed and reliability where traditional bank loans fall short. Private money, non-bank loans can close quickly, making them ideal for competitive real estate markets where good deals sell fast.

What are the differences between private money loans and conventional loans?

Private money loans typically have faster closing times and fewer requirements than conventional loans. However, they also tend to have higher interest rates and shorter pay back periods as compared with conventional loans.

How can private money loans help me grow my real estate portfolio?

Private money loans allow you to purchase properties that may not qualify for bank financing. This flexibility can help you add properties to your portfolio quickly and with less hassle.

What do I need to qualify for a private money loan?

Qualifying for a private money loan is often easier than qualifying for a bank loan. There are typically no minimum credit score or income requirements, and the property you want a loan against doesn’t need to be in good shape or rented to qualify.

How can I find private money lenders?

You can find private money lenders through internet searches, local real estate agents, and real estate investor groups. It’s important to establish a relationship with a lender and understand their requirements before you start looking for properties to buy.

How can I get pre-approved for a private money loan?

To get pre-approved, reach out to us at the phone number on our contact page, or submit a contact form on that page. Then one of us will reach out to you via phone, or via email, to get you pre-approved. 

Who Needs Private Money Loans? Different Borrowers, Different Reasons

Introduction: Debunking Private Money Loan Myths

There are a lot of people that mistakenly believe that private money, non bank loans are for people who can’t qualify for bank loans. They wonder why people would pay the higher interest rates that typically come with hard money loans unless they have bad credit, a past bankruptcy, a past foreclosure, or another credit problem. But there are countless reasons that people need hard money loans, and trust me, it’s not because they don’t qualify for a bank loan.

In fact, some hard money borrowers are A+ borrowers, which means they have no problem qualifying for a traditional bank loan at the lowest interest rate available. Then why do people get hard money loans?

Understanding Private Money Loans: Key Definitions

In this article, the term, ‘hard money loans,’ will be used interchangeably with the term ‘private money loans.’ But check out this article defining hard and private money loans for more explanation about these terms. Here are some of the most common uses for hard money loans; I’ll bet that some of these will surprise you.

Why Choose Hard Money Loans: the Advantages for Real Estate Investors

One of the most common uses for hard money loans is to purchase real estate similar to an “all cash” purchase. Hard money loans, often utilized for making an all-cash offer with hard money, tend to take the appearance of an all-cash offer. This is because these loans close very fast and don’t have many of the same requirements as bank loans for approval. Bank loans can take weeks or months to close, while private money loans have the advantage of closing in under a week.

And if you can purchase a property quickly, with cash or cash equivalents, you may get a better deal on the property. This is why hard money loans are crucial to the success of real estate investors. Real estate investors are able to make money in real estate and scale faster their portfolios faster because of hard money loans. View our article to  learn more about how real estate growth through hard money.

The Use of Hard Money Loans in Purchasing Distressed Properties
Business person and distressed property representing diverse private loan borrowers

Vacant properties, or even partially vacant properties, seldom qualify for traditional bank loans, even if the borrower does qualify. Properties that need tenant improvements, repairs, and those that are not generating income often do not meet the lending standards of banks. Even if a property is fixed up and rented, some banks still won’t lend on it until the property has been showing consistent rental income for a specific period of time.

This leads us to another common use of hard money loans which is to fund the purchase of distressed assets. If a property becomes distressed, it can either be sold at a discount, or the loan (note) can be sold at a discount. People who buy distressed property assets often use non bank, private money loans to purchase them.

Partner Buyout Loans: An Often Overlooked Use of Hard Money Loans

And then what about “partner buyout” loans using real estate as collateral? A partner buyout loan is where you buy out a partner’s interest in a property using a loan. Partner buyouts are another common reason people get hard money loans. Banks and other traditional lenders aren’t the type of lenders that will typically make partner buyout loans for a variety of reasons. This is a way for real estate investors to replace equity (a partner) in a property, with debt (a lender), on a property.

Divorce Settlements and Hard Money Loans: a Unique Solution

Icons representing scenarios for private loan needs

In divorce settlements, often the partner that wins the property in the divorce is required to get the other partner’s name off the title to the property. If there is an existing loan on that property, the partner that wins the property in the divorce is required to refinance the loan in order to get the partner’s name off the title to the property. And it’s not just as easy as calling the lender and getting the ex partner’s name removed from the loan. Usually it means the loan will need to be paid back in full to remove the ex partner’s name from the title.

Removing a partner from a property in a divorce using a traditional type of loan is not fast or easy. If the process takes too long, some divorce attorneys will try and force a quick sale of the property. In this situation, a type of hard money loan often called a “bridge loan,” can be used to pay off the existing loan on the property and remove the other partner from the title without being forced to sell it.

Paying Off Reverse Mortgages with Hard Money Loans

A hard money loan is a good solution to pay off a reverse mortgage when parents pass away or move out of a home. Often children will inherit a property in the event of a parents death. If the children want to keep the property rather than sell it, they will have to pay off the reverse mortgage fairly quickly in order to take title to the property. This is another common situation where a private money loan is used; to pay off a reverse mortgage on a property.

Entrepreneurs and Business Owners: an Unexpected Beneficiary of Hard Money Loans

Business owners or entrepreneurs who are seeking funds to operate, or start a new business, will often seek out private money loans against real estate assets they own. Funds can be difficult to source for business owners who need them on short notice, for example, to fulfill obligations of new contracts. Hard money loans can be taken out against the real estate assets of a business owner for short term business needs of under 12 months. In other words, a business owner can use real estate as collateral for a business purpose, hard money loan.

Gap Loans and Mezzanine Financing: Meeting Real Estate Investor Needs

And then there are real estate investors who need what’s called a “gap loan“, or “mezzanine financing.” This is a loan in a second lien, or even a third lien position on the property. This means that a real estate investor has a first mortgage loan on the property in a first position (first lien). And then on the same property, the real estate investor also gets a second mortgage loan, or second position (second lien). Gaps loans and mezzanine financing are almost always from private money sources because they are perceived as being too risky for most traditional bank lenders who only lend in a first position on a property.

Bridge Loans: Solving the New Home Purchase Dilemma

There are home buyers who want to buy a new home but they have to sell their current home first. This is because many homeowners need the down payment funds from the sale of the current home to put towards the purchase of the new home. But how do you time it just perfectly to be able to purchase a new home at exactly the same time you sell the current one? Nothing short of magic!

Home buyers in this position risk being temporarily homeless if the current home sells before they find a new home to buy. Home buyers also fear the idea of having to deeply discount their current home to sell it quickly in order to be able to purchase the new home they already identified.

The type of private money, non bank loan that is most frequently used by homeowners in this situation is referred to as a temporary bridge loan. This is a loan that acts like a bridge to connect the home buyer to a new home, while the current home is listed for sale. Using a bridge loan, home buyers are able to purchase and move into a new home, without having to discount the price on the former home for a quick sale.

Transactional Loans: a Quick Solution for Real Estate Investors

Can you imagine getting a loan and paying it back, all on the same day? Transactional loans, also called transactional financing, allow real estate investors to purchase real estate that they’ve already pre sold to someone else. In other words, they have a buyer for a property before they even purchase it. This is called a “transactional” real estate purchase, also referred to as a “double close.”

Transactional real estate deals must be able to close with all cash, or as quickly as all cash. These types of loans are almost always non bank, hard money loans because they must close so quickly, and often with very short notice. Transactional loans most commonly fund, and get paid back, all in the same 24 hour period.

Conclusion: the Versatility of Private Money Loans

There are so many other reasons why people take out hard money loans, these are just a few examples. If you’re wondering if a private money loan is the right fit for your situation, leave a question below, or reach out to us using our contact information on this site. And if you want to learn more about private money loans, please subscribe, or follow us on our online channels.

Property won’t sell? What to do if you have a hard money loan

If you are a fix and flip investor, you may be holding a property that just won’t sell. Whether it’s because prices are going down, or whether interest rates are too high. Whatever the reason, you’re stuck holding a flip. So, what do you do? 

a renovated house for sale

If you have a hard money loan on the property, you really have a dilemma because it usually means interest is racking up fast on the loan, which is eating into your profit on the deal. And the clock is ticking on the loan due date as well because typically these are short term loans. And once the loan term is up, the lender wants the loaned funds returned. 


The good news is that there are solutions at your fingertips that may help you navigate this difficult situation. Here we go:


Communicate With your Hard Money Lender

 Never make the fatal mistake of keeping your problem to yourself. I can’t emphasize this point enough. Communicate with your hard money lender at the earliest stage possible when you know you’re in trouble. And don’t be afraid to over communicate, every week at the minimum. Don’t wait, because it may be too late for your lender to help if you wait too long. Many hard money lenders are well versed in real estate, and many are also very well connected, so they may be able to provide advice or resources. And even if your lender can’t help your situation, at least the lender won’t be surprised if you miss a payment, or need an extension.



Doing a pivot means changing your plan or course of action. In this case it means renting the property and holding it, rather than flipping it. If you have a hard money loan on the property, renting it will help you generate immediate income to offset the loan payment. But you have to communicate this pivot with your hard money lender so the lender knows your plan. You can try and negotiate with your lender and suggest a loan modification by either extending the loan for a longer term, and/or negotiating a lower interest rate. This can provide some breathing room, and allow you more time to sell the property. If you can’t negotiate a loan modification with the current lender, you will need to pay the lender back by refinancing the current loan. This point leads us to our next solution, under number 3 below.

Refinance the Property with a Long Term Rental Property Loan

If you’ve made significant improvements to the property and have it rented, you may be able to refinance the property with a long term, rental property loan to pay off the hard money loan. A long term, rental property loan, sometimes called a “DSCR” loan, has a lower interest rate as compared to a hard money loan. These loans also have longer terms such as a 5 year term, 7 year, or a 30 year. Refinancing the hard money loan with a lower rate can help to lower your monthly payments. If you refinance with a lower interest rate, it will take off some of the financial strain that comes with holding the property. But remember, you won’t be able to qualify for a loan like this until you take the property off the market.

Refinance the Property with another Hard Money Loan

If you can’t qualify for a long term rental property loan, you could try to refinance out your hard money loan using another hard money lender. This would give you more time, say another 6 to 12 months, to either sell the property or rent it. This type of hard money loan is often called a bridge loan because it helps to “bridge you” from one phase to the next. And then ask yourself if you know an associate, family member, or friend that would be willing to become your new hard money lender and pay off your current loan? If you can negotiate a lower interest rate with this individual, this arrangement could be a win-win for both you and the new lender.  

Find an Equity Partner

You could try to find an equity partner that wants to have co-ownership with you in the property. This person could bring in cash equity to pay off the hard money loan and thus become a partner in the property with you. This means you’ll need to create a joint venture agreement with the equity partner, or form a business entity to hold title to the property whereby you are partners in that business. If you decide to pursue this solution, I recommend finding a real estate attorney and a CPA  to help you structure the partnership in the property.

Sell the Property at a Loss

If you’re unable to make any of the other above solutions work for you, then you may need to consider selling the property at a loss. You can use this loss to offset your tax liability. Talk to an accountant or CPA about how this would work for your personal situation. While selling the property at a loss may not be the ideal solution, it can help to minimize the financial impact that holding the property could have on your life over the long term.

Trying to sell a fix and flip property in a declining real estate market, or in a market with rising interest rates, is a tight spot to be in. By taking no action at all, and just waiting for the property to sell, you are just sitting on a ticking time bomb. However, with careful consideration of the solutions that are outlined in this article, it is possible to minimize the financial impact on you. 


If you have a hard money loan on the property, communicate with your hard money lender early and often. Always seek advice from professionals when considering these solutions, for example, involve your real estate attorney or your accountant/CPA in your decision making and planning. If you are considering refinancing your hard money loan on a property, we have both bridge loan options, and long term, rental property loan options available, so reach out to us! You may be glad you did.


Don’t Risk It! Make Sure You Have the Right Insurance for Your Investment Property

Did you know that real estate investors tend to be the most underinsured group of property owners? This truth is hard to believe considering most real estate investors are putting their life savings into their investment properties. In fact, insurance is one of the things that real estate investors tend to cheap out on the most! Stick around for a bit because I’m going to outline some of the biggest insurance risks to help you understand what type of investment property insurance you probably need.

Insuring your investment properties is one of the best ways to mitigate risk in real estate investing. But that starts with making sure sure you have the right insurance for your investment properties. You need property insurance to not only protect yourself, but if you have a loan on your property, it also protects your lender. It doesn’t matter if you have a hard money loan or traditional mortgage, as you will responsible for loss

There are different types of insurance to consider when you own an investment property, and for many people, it’s overwhelming. In order to protect an investment property from loss, you’ll need to have coverage for things like fire, theft, and vandalism.

You’ll also want to be sure that you’re protected in the event of an accident on your property or from natural disasters such as earthquakes, floods, tornados, and wildfires. And then what about the loss of use of the property while it is being rebuilt or repaired?

We are not a licensed insurance agency, so please consult with a licensed insurance agent when purchasing insurance policies. But as a private money lender, we often find that the property insurance is the least known area by real estate investors who are usually the borrowers of our loans.

Because a lender is essentially a borrower’s debt partner on a property, it is important that the borrower have the right type of coverage because a potential loss will impact the lender as well. Here we explain some of the most commons types of insurance coverage that our borrowers need to protect their investment properties.

Make Sure You Have Enough Dwelling Replacement Coverage!

One of the most important aspect of any insurance policy is the amount of coverage needed to rebuild the property in the event of a total loss. For most residential policies, the dwelling replacement coverage is the dollar amount that will be available to rebuild the property.

Because the cost of construction is never fixed but is always fluctuating, property owners must revisit this dollar amount frequently to make sure they have adequate coverage or coverage limits are not exceeded. Particularly if building supplies and labor costs are increasing year after year, your coverage may need to be increased slightly every year. Some insurance policies have guaranteed replacement coverage which takes into account inflation of construction costs.

Liability coverage Insurance

Why would you need liability coverage? What if someone gets hurt on your property and sues you? The liability coverage amount listed on your insurance policy is the dollar amount the insurance company will pay if someone is injured on your property. Always make sure your insurance policies have a high dollar amount of liability coverage for renters and other people that enter the property premises. An accident could happen on your property that could cause injury or death to another person and this is why every real estate investor should take liability insurance very seriously! Liability costs will vary depending on the amount of coverage you need. Personal liability policies are also available that cover all of your properties.

Builder’s Risk Insurance

Builder’s risk is a type of insurance coverage that you can obtain on an investment property that is under renovation or construction. If you are building an investment property from the ground-up, or if you are renovating an investment property, builder’s risk insurance may be a type of insurance that you should look into. Builder’s Risk Insurance can be purchased by a property owner, or can be held in the name of the general contractor who is doing the construction work on the property.

Theft Insurance & Vandalism Insurance

Thieves often target vacant properties under construction, so it’s important to have theft insurance coverage if you have a vacant property under construction. Theft insurance is a type coverage that falls under a builder’s risk policy. But if you don’t have a builder’s risk policy, make sure your insurance coverage will protect you from loss if your building materials, tools, equipment, or appliances are stolen.

Vandalism insurance covers the premises and personal property from intentional damage caused by a third party. Builder’s risk policies usually cover vandalism but if you don’t have a builder’s risk policy, just make sure the policy you have covers vandalism. A broken window, tagging/graffiti, exterior property damage from eggs being thrown at the exterior of the property, are just a few examples of vandalism damage.

Vacant or Unoccupied or Property Insurance

If your property is vacant for longer than 30 days you should look into a vacant or an unoccupied insurance policy. What’s the difference between the two types of policies? If your home has personal belongings in it but it is not occupied for longer than 30 days it is considered “unoccupied.” When there are no personal belongings in it and it is empty for longer than 30 days it is considered “vacant.”

When a property is vacant or unoccupied for extended periods, it is considered higher risk, so the premiums for this type of insurance are a higher cost. Particularly in areas with high crime, it’s important to have vacant and unoccupied insurance for any properties that will be vacant for extended periods to protect it against vandalism or theft. Because vacant property insurance is more expensive than rental property insurance, property owners sometimes declare a vacant property as being tenant occupied to save money on insurance costs. Don’t do it!

Never say a property is occupied by a tenant when it is actually vacant in order to save money an insurance policy premium. This is because an insurer may not pay an insurance claim if the true occupancy status of the property is not declared. The good news is that you can have different types of insurance for the different stages of your property’s life. For example, you may need vacant dwelling coverage for your investment property while the property is under renovation for the first six months. Once the property is rented, you can change the insurance to a landlord/tenant policy (rental property insurance).

Landlord and Rental Property Insurance on an investment property

Rental property insurance or landlord insurance on an investment property is important for 3 important reasons.

First, it protects your investment in the event of damages caused by tenants, such as a fire or water damage.

Second, it protects your income if a tenant skips out on rent payments.

And, finally, rental insurance can help protect you from liability and cover medical costs in the event that someone is injured while on your property.

For these 3 reasons, it’s important to have rental insurance on any property you own that is rented to tenants. And your insurance won’t cover your tenants’ personal affects such as furniture, bikes, etc., so make sure your tenants are aware of this and if they are concerned they should purchase their own rental insurance or landlord policy coverage.

Loss of Use Coverage

Loss of Use Coverage is critical for tenant occupied rental properties. This type of insurance coverage will pay if your tenants are unable to occupy the property due to a loss. Sometimes loss of use coverage will put your rental property tenant in temporary housing or a hotel if the property is uninhabitable. This could possibly cover rental income as well. Loss of use coverage usually comes standard with most insurance policies, but be sure that it is a stated coverage on your specific policy.

Fortunately, there are ways that real estate investors can protect themselves from suffering too much financial hardship due to loss of use. One option is obtaining loss of use insurance, which helps to cover expenses related to lost income during such periods. This type of coverage is typically included with landlord insurance policies and can help minimize potential losses due to having a vacant rental property.

Fire Insurance

Fire insurance is a standard coverage found on most insurance policies. Fire insurance covers the cost to rebuild or restore a property that has been damaged or destroyed by a fire. It also covers the replacement of personal property that has been damaged or lost due to a fire. And fire insurance coverage will also cover costs associated with the loss of the use of a property while it’s being repaired or rebuilt.

For example, if your tenants are displaced from a property after a fire, your insurance coverage ought to reimburse you for loss of rents and cover the cost of relocating your tenants temporarily. Because investment properties with tenants are treated differently than owner occupied properties, make sure your fire insurance coverage will cover all of the potential losses associated with a fire.

Wildfire Insurance

In recent years, we’ve seen an increase in wildfires and, as a result, the demand for wildfire insurance has also gone up. If your investment property is located in an area where it has exposure to wildfires, wildfire insurance is specifically designed to insure property owners from damage to their properties caused by wildfires.

If you already own one, or you are considering purchasing an investment property in the western United States, be sure to ask your insurance agent about wildfire insurance. It could be the difference between losing your investment and keeping it safe and protected.

Earthquake Insurance for your Investment Property

If you’re an investor with a property located on or near an active earthquake fault line, it’s important to make sure you have adequate insurance coverage. One thing that most people don’t know is that earthquake insurance is not covered under most hazard or homeowners insurance policies. This is because it is a speciality insurance coverage that will cover the cost of rebuilding your property if it is destroyed by an earthquake or suffers structural damage. It will also cover other structures on your property, such as driveways, garages, warehouses, and small storage buildings.

For example, the Wasatch Fault in Utah represents one of the biggest earthquake risks in the interior of the western U.S. In 2020, a magnitude 5.7 earthquake in a suburb of Salt Lake City, caused over $60 million dollars in property damage. For property owners without specific earthquake coverage, this meant the potential for a total loss! Because many people have their life savings tied up into their investment real estate, a total loss from an earthquake would be utterly devastating. That’s why it’s important to make sure you have adequate coverage in place before an earthquake strikes. As a private money lender, it is important to us that our borrowers have earthquake insurance coverage on any property we lend on that is located on, or near, an active fault.

If you own a property in an area that is prone to earthquakes, earthquake insurance will cover the cost of repairing or rebuilding that property if it is damaged by an earthquake. It will also cover the cost of temporary living expenses if you need to relocate while your property is being repaired. Make sure your policy has a low replacement deductible and enough dwelling replacement coverage to rebuild the property in the event of a total loss from an earthquake.

Flood Insurance for your investment property

Because flood plain maps are always changing, a property currently located in low flood risk area may be at increased risk of flooding in the future. This means the risk profile for a certain location may change over time with regard to flooding and flood zone classification. Flood insurance will cover the cost of repairing or rebuilding your property if it is damaged by a flood.

If you’ve owned a property for a long time that is located in an area with potential for increased risk of flooding, it is important to assess this risk every few years. This type of risk is something that a property owner needs to assess frequently with the help of a licensed insurance agent.

And, even if you do have flood insurance, it’s important to make sure you have enough coverage to rebuild your property should it be damaged by a flood.

Windstorm Insurance, Tornado, and Hurricane Insurance for your investment home

Windstorm insurance is insurance that protects investors from damage to their investment properties caused by gales, winds, hail, and other gusty hazards. When big winds harm roofs and windows, rain and debris can also damage the personal belongings inside a property. Ensure that your windstorm insurance policy covers physical damage to the property and possessions inside the home. Also, make sure you have the right amount of coverage in place to protect yourself from potential losses!

In some states, insurance for tornados, cyclones, and hurricanes require you to purchase a special policy which is typically more expensive. This type of coverage is something you really need to discuss with a licensed insurance agent that specializes in issuing coverage for properties in areas that are prone to destructive storms.


Real estate investors tend to be underinsured as compared to typical homeowners. Many real estate investors either skimp out on insurance, or just don’t get the right type of coverage. If you are a real estate investor, get the maximum amount of insurance coverage that you can qualify for your investment properties. You local insurance agent will  know what insurance products you will need and explain any policy limits.   Depending on the location of your properties, you may require different types of insurance for each location.

As a private money lender, we see real estate investors making the same mistakes when it comes to insuring their investment properties. Don’t let that be you! Find a qualified insurance agent that understands how to insure your properties right. Finding the right insurance agent to issue the right type of insurance coverage could mean the difference between making a good investment or having a total loss of your life savings.

Hard Money Loans Vs Private Money Loans Explained

Hi this is Corey Dutton, I’m a private money lender and today I’m going to talk to you about, “private money explained.” Some of the questions that I’m going to answer for you today are:

  • What is a private money loan or what is a private money lender?
  • How is a private money lender different from a hard money lender?
  • What are the typical interest rates that are associated with a private money loan?
  • And what are a few ways that private money loans are used?

So what is a private money loan?

A private money loan is any non bank loan. So any loan that comes to you from a non depository institution.

Now, many people have a misconception that private money loans and hard money loans are two different things.

What’s the difference between a private money lender and a hard money lender?

Absolutely nothing!! I see it all the time, I see these videos online where these people are like, “why use a private money lender over a hard money lender?”

Again folks, a private money loan is any loan that comes from a non bank source, ok. So a hard money loan is just another type of non bank loan.

But why is it called hard money instead of private money? What’s the difference between private money and hard money? Like I said before, absolutely nothing!

They’re both non bank loans from a non depository institution. But why does hard money have that name, “hard?” It’s because a hard money loan is any loan against a hard asset.

WhatAre Typical Hard Money Interest Rates

what is the typical interest rate that is associated with a private money loan or non bank loan? The interest rates that are typically associated with private money loans are going to be a lot higher than your typical bank loan.

Usually the rates are going to range from as low as say 8% to as high as 18%. Yes I’ve seen them that high before.

And then finally, what are a few ways that people use private money loans? Well, most typically in my business, private money loans are loans against real estate.

But private money loans could be loans against any type of asset, any type of hard asset such as a car, such as gold.

Ok, those are just a few examples of hard assets that can be liquidated fairly quickly for cash. So


Hopefully I explained to you a little more about what is private money and how is it different from hard money.

The answer, the simple answer to that question is: absolutely nothing! There’s no difference!

And what you will commonly hear, you’ll hear this from other people, they’ll say something to you like, “Well you should start with private money lenders first and then if you can’t get a loan from one of them go to a hard money lender.” Well that’s wrong!!

The reason that’s wrong is because a private money lender is NOT your family and friends, and then a hard money lender is like me, an organized company with a website. No, no, no, no, no! It’s all the same, we’re all private money lenders.

So hopefully you learned something from this and that thing is: There’s no difference between private money and hard money.

If you have any questions about anything that I’ve said here, please leave them in the comments section below and I’m happy to answer you. If you found this video useful, or you liked it, please like it or share it. Thanks for watching!