Does a Hard Money Loan Make Sense for Your Deal? Here’s How to Know in 5 Minutes
A step-by-step deal analysis framework from a direct, private lender with 18+ years of experience funding real estate across Utah and the Mountain West.
About the Author — Why This Content Is Credible
Corey Dutton | Private Lender & Co-Owner, High West Lending (formerly Private Money Utah)
Corey has been funding real estate deals directly since 2008. That means she personally evaluated deals through the 2008 financial crisis, the slow recovery, the 2021 price frenzy, and today’s higher-rate environment. High West Lending has funded over $550 million in hard money loans across Utah, Wyoming, Montana, Colorado, and Idaho. Before issuing a single term sheet, Corey reviews every deal herself.
Credentials & Experience: Direct hard money lender since 2008 · $550 MM+ in hard money loans funded · In-house underwriting · Mountain West financing specialist.
Most real estate investors ask the wrong question when they first encounter hard money lending. They hear a 12% interest rate, compare it to their bank’s 6% rate quote, and walk away from a real estate investment deal that could have returned them $40,000 or more in six months.
That comparison is irrelevant — and I am going to show you exactly why, and what question you should be asking instead.
I am Corey Dutton. I have been lending my own capital on real estate deals across the Western US since 2008. I have seen deals that made perfect sense at a 14% interest rate, and deals where the numbers didn’t work at 8%. The rate is not the variable that matters most. Whether your deal can absorb the cost of hard money financing and still pencil — that is the question.
This guide will walk you through the exact framework I use before issuing a term sheet for a hard money loan. Run these numbers before you call a hard money lender — or any lender — and you will know in about five minutes whether hard money makes sense for your real estate project.
Important Note on Financial Content: The examples in this article are drawn from real deals funded by High West Lending and are presented for educational purposes only. Real estate investing involves financial risk. Deal outcomes depend on property condition, market conditions, cost of inputs, borrower experience, and many other variables. We recommend consulting a licensed real estate professional, CPA, and/or a financial advisor before making any investment decisions. All loan terms are subject to underwriting approval.
Section 1: Why Comparing Hard Money Rates to Bank Rates Is the Wrong Move
The most common mistake I see from real estate investors calling us for the first time? They open communications with an interest rate comparison. “Your rate is 12%. My bank is at 7%. Why would I pay that much more?”
Here is why that question misses the point entirely. That comparison only makes sense if hard money and a conventional bank loan are equally interchangeable financing options for your deal. But they never are.
Hard money fills gaps that conventional lending cannot or will not fill:
- Speed: You need to close in 10 days. A conventional lender will take 30 to 45 days.
- Property condition: Banks will not lend on distressed properties that need significant rehab. Hard money lenders are built for exactly that.
- Bridge financing: You need to close on a new property before your long-term financing is in place. Conventional lenders have no loan product for this.
- Non-traditional income: You are self-employed or your income does not fit neatly into a bank’s debt-to-income formula.
- Speed of decision: You need a yes or no in 48 hours, not three weeks of back-and-forth with a loan underwriter.
When hard money is the only tool that lets you capture the real estate deal at all, the 12% rate is not expensive — it is often the cost of obtaining a unique opportunity that a bank cannot provide for.
From 18+ Years of Deals: The Rate Is Rarely What Kills the Deal
I have funded deals that made excellent sense at a 14% interest rate — because the spread was wide, the exit strategy was clear, and the timeline was tight. I have also seen deals fall apart at 8% — because the ARV was inflated, the hold time stretched twice as long as planned, and the financing cost consumed all the margin. The rate is one variable in a multi-variable equation. This framework helps you solve the whole equation, not just one line of it.
Section 2: Run the Numbers First — A Real Utah Fix & Flip Example
Let me walk you through a real deal using actual numbers. This is the same framework we use at High West Lending before issuing any term sheet, and it is the same framework you should run before you call any private lender.
The Property
Weber County, Utah — a market that is home to two ski resorts, with strong buyer demand, and a defined comparable sales history that I know well.
| Deal Component | Amount | Notes |
| Purchase Price | $280,000 | Negotiated acquisition price |
| Rehab Budget | $60,000 | Labor, materials, contingency |
| Total Cost | $340,000 | Purchase + rehab combined |
| After Repair Value (ARV) | $460,000 | Based on verified comparable sales |
| Gross Spread Before Financing and other costs | $120,000 | ARV minus all-in cost |
A $70,000 gross spread before financing looks strong — but you are not done with the math yet. This is where a lot of investors stop too early.
Pricing the Hard Money Loan
At High West Lending, our standard fix-and-flip loan guidelines are: up to 70% of ARV, not to exceed 85% of the combined purchase price and rehab budget. Here is what that looks like on this deal:
| Financing Component | Calculation | Loan Amount |
| Loan Amount (70% of $460K ARV not to exceed 85% of Total Cost) | 70% × $460,000 = $322K (Not to exceed 85% of Total Cost = $289,000) | $289,000 |
| Cash You Bring to Closing | $340,000 − $289,000 | $51,000 + closing costs |
| Interest at 12% for 6 Months | $289,000 × 12% × 0.5 | $17,340 |
| Loan Fee (1.5 Points) | 1.5% × $289,000 | $4,335 |
| Total Financing Cost (6 months) | $17,340 + $4,335 | $21,675 |
If you want to run these metrics against your current property scenarios, you can utilize our interactive investment calculators to forecast your net returns.
The Full Profit Picture
| Line Item | Amount |
| Gross Spread (ARV − All-In) | $120,000 |
| Less: Total Financing Cost | −$21,675 |
| Less: Realtor Commissions (6% of ARV) | −$27,600 |
| Net Profit Before Holding Costs | ~$70,725 |
| Remaining Holding Costs (taxes, insurance, utilities, title) | −$3,000–$6,000 est. |
| Realistic Net Profit | ~$64,725 –$67,725 |
My Assessment of This Real Estate Deal
A net profit of $64,725 to $67,725, on a six-month project is good. From the perspective of a hard money lender, this is a fundable deal. Is it worth a 12% rate?
Yes, because the financing cost of $21,675 is the price of accessing a deal to obtain a profit that a bank cannot fund. Treat it the same way you treat your labor and materials budget on a rehab — it is a cost of doing business, not a reason to walk away from it.
Section 3: Three Questions to Answer Before You Call Any Hard Money Lender
Before I issue a term sheet on any loan, I want to know the answers to three questions. These are the same questions you should ask yourself before you tie up earnest money on a property.
Question 1: What Is Your Realistic Exit Timeline?
Are you selling the property after rehab, or refinancing into a long-term loan like a DSCR product? Each exit strategy carries a different timeline, and your timeline is what drives your total interest cost, or your total cost of financing.
A six-month loan, and a twelve-month loan, at the exact same interest rate can have dramatically different total costs — and dramatically different risk profiles. Here is the rule I use with every borrower: Run your numbers assuming the project takes twice as long as you expect. If the deal still makes sense at double your projected timeline, it is a deal worth pursuing. If it only works on a perfect timeline, this is hope, not a strategy.
Question 2: Have You Accounted for Every Cost?
Investors who get into trouble on fix-and-flip projects almost always have the same problem: they planned for the rehab costs and forgot about everything else. Here is a complete cost inventory:
- Rehab labor and materials — with a contingency buffer of 10–15% for surprises
- Financing costs — interest, loan fees, and any extension fees if the timeline stretches
- Title/Escrow fees – lender’s title policy on the purchase, an owner’s title policy on the exit, and all of the processing fees and additional fees that title and escrow companies charge on the front end, and on the back end, of the transaction.
- Holding costs over double your expected timeline — property taxes, insurance, utilities, HOA fees
- Selling costs — realtor commissions, transfer taxes, staging
- Cash required to bring in at closing — the gap between your loan amount and your total project cost
- Opportunity cost — what else could this capital be doing during the six to twelve months where it could be making a higher rate of return?
Question 3: Does the Spread Cover It?
After accounting for every cost, run the full profit calculation I walked through above. My rule of thumb for evaluating margin:
| Profit Margin vs. ARV | What It Means | How I View It |
| Above 20% of ARV | Strong margin | Fund with confidence |
| 15–20% of ARV | Healthy margin | Fund — solid deal |
| 10–15% of ARV | Thin but workable | Fund with solid exit and experienced borrower |
| Below 10% of ARV | High risk | Requires strong exit and deep borrower experience |
| Below 5% of ARV | Deal is broken | I will not fund this — and you should not pursue it |
Section 4: The Deal I Passed On — And What Happened Next
The job of a good private lender is not to say yes to every deal. It is to tell you the truth about your deal before you are locked in.
Case Study: A Mountain Town Commercial Flip
The Deal: A repeat borrower — someone I had worked with before and liked — brought me a small, commercial retail property in a mountain town market.
The Problem: I had been watching that specific market for 15 years. The two comparable sales he was using were from very different streets. The ARV that I calculated was much lower than the borrower’s projected ARV, and he was planning a 9-month timeline on a project that I believed would be 12+ months.
My Decision: I told him I could not fund the deal at those numbers. The ARV was not as high as the borrower believed, and the timeline risk would quickly eat up his profit.
What Happened: He went to another hard money lender who said yes and funded it. The project took 13 months. He broke even. No profit on 13 months of work and risk.
The Lesson: A private lender who says yes to every deal is not serving you — they are serving their own fee income. Test your resale value and projected timeline for a project by getting multiple opinions.
Section 5: How High West Lending Evaluates Your Real Estate Deal
We are a direct lender. When you call High West Lending you speak directly with the decision maker. I review your deal myself, against my knowledge of the specific market, and I can tell you quickly whether we can fund it and what it will cost.
What We Look at Before Issuing a Term Sheet
- Exit strategy and timeline (worst-case scenarios)
- Full cost inventory
- ARV verification
- Loan-to-value
- Borrower experience
- Net profit
Section 6: Your Pre-Call Checklist
Run through this checklist before you call us, or any hard money lender about a real estate deal. If you can check every box, you are ready to have a productive conversation with a lender.
- I know my purchase price, rehab budget, and ARV (based on closed comps from the last 6-12 months).
- I have calculated my total all-in cost (purchase + rehab with 10–15% contingency).
- I have run the full profit calculation including financing, holding, and selling costs.
- My profit margin is above 10% of ARV after all costs, even if the project takes twice as long as planned.
- I have a clear, specific exit strategy and a back up plan.
- I have the cash for closing (15–20% of total project cost).
- I have experience with this type of project (or a team that does).
Section 7: Hard Money Loan Programs at High West Lending
We fund across Utah, Wyoming, Montana, Colorado, Idaho, and the broader Mountain West.
| Loan Type | Typical Use Case | Key Terms |
| Bridge Loan | Close fast | Short-term, interest-only |
| Fix & Flip Loan | Purchase + renovate | Up to 70% ARV / 85% of cost |
| Construction Loan | Ground-up builds | Draw schedule based on milestones |
| Rental Property Loan | Long term rentals | Qualify on property income |
| Apartment / Multifamily Loan | 2–50+ unit properties | NOI and cap rate underwriting |
| Commercial Bridge Loan | Mixed use, retail, industrial, and other | Value-add and stabilization |
Frequently Asked Questions
Q: What is the difference between a hard money loan and a conventional mortgage?
A conventional mortgage is underwritten on personal income and credit, taking 30–60 days. A hard money loan is asset-based, based on the property and deal structure, allowing for closings in days or weeks.
Q: What interest rate should I expect?
Our hard money loan rates are typically in the 11–13% range. The rate is interest-only. The more important number is your total financing cost over the hold period.
Q: How much cash do I need to bring?
Plan to cover the gap between your all-in project cost and the loan amount — roughly 15–25% of total cost — including closing costs.
Q: Do you care about my credit score?
We are primarily asset-based. However, very low credit scores (generally below 600) combined with lack of experience, can affect terms.
Q: How fast can you close?
Typically 5 to 10 days. We can provide a term sheet within 24 to 48 hours.
Q: What happens if my project takes longer?
Most of our loans are for a term of 12 months. However, our loans can be extended for a fee beyind the initial loan term of 12 months.
Q: Do you lend outside of Utah?
Yes, our primary states are Utah, Wyoming, Montana, Colorado, and Idaho.