Using Hard Money To Finish A Real Estate Project

Real estate is big business in Kenya. The real estate industry has been growing for some time now, and according to Statista, it is adding greatly to the country’s GDP.

According to the statistics website, real estate added around $4.7 billion to Kenya’s GDP during the first six months of 2021.

During the last five years, this sector has grown year on year, creating billions of dollars.

Where does all the money come from for investing in real estate? What happens if the traditional lending routes are not open to someone involved in an unfinished real estate project?

This is where hard money can come in.

What is hard money?

There are the regular types of mortgages available in Kenya. However, they don’t suit all types of investors.

An individual, or a business, may find themselves involved with a real estate project and need an influx of cash quickly. It may be this project is unfinished, but needs further investment.

It may also be that traditional routes, such as mortgages or property loans, are not suitable, or available.

Hard money, therefore, becomes an option. This is a type of loan supplied for short-term purposes. It is often called a bridging loan and can be used to create a financial bridge until a sale is made.

How can a hard money loan be used?

One example is that of the bridge mentioned above.

Imagine you were buying a new home and selling your existing one.

Everything is going well until your buyer pulls out. Unfortunately, you are committed to the new property but you no longer have the funds available. A bridging loan can help you to buy a new home while waiting to sell the old one.

They can also be used to complete construction on an existing real estate project. Perhaps financing is unavailable to complete construction. A hard money loan could bridge the gap until the property is finished and sold.

Where do you find a hard money loan?

This is where the differences between hard money loans and standard borrowing options differ.

For a mortgage or loan, you would ordinarily go to the bank. There are, of course, other mainstream financial lenders to choose from also, however, they all like to see creditworthiness.

A hard money lender is less interested in creditworthiness compared to the repayment strategy being suggested. Companies such as DFW Hard Money are true private lenders who do not need credit checks.

Are hard money loans used for real estate projects?

This is exactly what hard money loans are available for. They help with private and commercial lending, and with development.

Property and land development can be partly financed through hard money loans. They can be used in construction, or for repairs and improvements.

Sometimes an investor balks at putting in the full amount into a real estate project. If this happens, they could take out a hard money loan to cover a percentage of the costs and reduce their overall risk.

According to the Global Property Market, real estate was heading for a slump before Covid happened. This could be partly due to investors overstretching themselves and being unable to complete projects.

This is an area that a hard money loan could help in.

Can hard money be utilized in house flipping projects?

One of the more popular ways to get involved in the real estate industry is to fix up properties and flip them for a profit.

This method has allowed many people to get into real estate investment from the ground level.

One property sale could finance a bigger one the next time. Then a big sale could finance two properties subsequently.

These kinds of loans are frequently used by these types of investors.

Why use a hard money loan for flipping homes?

While fix-and-flip is popular, it isn’t necessarily easy to get into.

To flip a home takes a good deal of cash, more so than buying a home to live in.

This is because the properties purchased normally require a sizable amount of repairs and renovations.

If the investor doesn’t have the cash to hand, they will need to use a loan. Mainstream lenders are not always keen on financing house flippers. They are often seen as a risky proposal.

Hard money lenders are far happier to lend to house flippers than banks are. This means that a house flipper is more likely to turn to a hard money lender than a high street bank.

Is a hard money loan risky?

There is one school of thought that hard money got its name due to the terms involved. It may, though, simply be referring to the hard assets that are used as security.

Although credit checks are of little importance with hard money loans, there has to be collateral in the form of property or land.

The terms though are normally a bit steeper than traditional lenders. This is due to the gamble that the lender is making.

Hard money loans are short-term, often a year maximum or just a few months. They need to be paid back like any other loan, and the interest rates are higher than banks.

A short loan period can be risky, and the danger is that defaulting will lead to the property being foreclosed on.

Nevertheless, hard money loans could be said to be riskier for the investor, and there are many pros for someone using this type of borrowing.

Pros and cons of hard money loans

While the high-interest rates and short lending periods may deter some, there are a lot of advantages to hard money loans. There are a few other cons too.

As far as real estate property projects are concerned, hard money loans are often the only answer. You may be interested in investing in property in Kenya, but if you don’t have the finances, will the banks assist you?

Using a hard money loan has these pros:

No need to prove creditworthiness

The process you will go through is nothing like applying for a mortgage and waiting for a decision.

Hard money loans can be approved fast with a short and convenient process. In short, there is no red tape.

Use different collateral

You may not have to secure the loan against the property project, although that is normal. You may be able to negotiate and use other collateral.

Hard money loans are flexible

Speaking of negotiation, a hard money loan is not restricted to black and white terms like a mortgage is. You can work out terms and repayment periods with the lender.

The cons of using hard money loans:

The high-interest rates and fees

You might find yourself repaying a loan at 18% interest, and face the prospect of repaying 5 points on top of that. Though, you may be able to negotiate to waive the points until the property is sold.

You need a clear repayment strategy

A short-term hard money loan is intended to get you to the position you want to be in quickly. You need to be certain that you can repay it when that period ends.


Hard money loans may not be appropriate for every property deal, but they can certainly help finish off some real estate projects.

The convenience they bring, along with the speed that the loan is disbursed, can help someone whose project needs help

They can be used for flipping homes, or for developing property and land. However, they also come with high-interest rates and points.

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