Investing in rental properties is a great way to build long-term wealth, but securing financing can be a challenge—especially for investors who don’t qualify for traditional bank loans. Hard money loans for rental properties offer a fast and flexible financing solution, allowing investors to acquire, renovate, or refinance rental properties with fewer restrictions than conventional loans.

In this guide, we’ll explore how hard money loans work for rental properties, their benefits, risks, and some of the best lenders offering these loans.

What Is a Hard Money Loan for Rental Property?

A hard money loan is a short-term, asset-based loan that uses the property as collateral rather than focusing on the borrower’s credit score or income history. Unlike traditional bank loans, hard money lenders prioritize the property’s value and potential cash flow over the borrower’s financial background.

For rental properties, hard money loans can be used for:
✅ Purchasing a rental property quickly
✅ Renovating or improving a property before renting it out
✅ Refinancing an existing rental property
✅ Bridge financing before securing long-term loans

Unlike fix-and-flip loans, which typically have terms of 6-24 months, many hard money lenders now offer longer-term rental loans (DSCR loans) with repayment periods of 5 to 30 years, making them a viable option for buy-and-hold investors.

Key Features of Hard Money Loans for Rentals

• Loan-to-Value (LTV) Ratio: Typically up to 75-80% of the property’s value (some lenders may go higher).
• Interest Rates: 7% to 12% (higher than traditional loans but lower than fix-and-flip loans).
• Loan Terms: 1 to 30 years, depending on the lender and loan type.
• Qualification: Based on the property’s potential rental income rather than personal income.
• Speed: Funding in as little as 5-10 days, much faster than bank loans.

Types of Hard Money Loans for Rental Properties

1. Bridge Loans for Rental Properties

• Short-term financing used to acquire or refinance a rental property before securing permanent financing.
• Useful for investors who need quick funding or want to buy under-market properties before refinancing.

2. DSCR Rental Loans (Debt Service Coverage Ratio Loans)

• A long-term financing option where lenders approve loans based on the property’s rental income rather than the borrower’s personal income.
• Ideal for buy-and-hold investors who want fixed-rate financing for 5-30 years.
• The property’s rental income must cover the loan payments (usually a DSCR of 1.0-1.25 or higher is required).

3. Cash-Out Refinance Hard Money Loans

• Allows investors to tap into their rental property’s equity to reinvest in more properties.
• Can be used to pay off other debts, make renovations, or fund new investments.

4. Portfolio Loans for Multiple Rental Properties

• Designed for investors with multiple rental properties who want to refinance or expand their portfolio with a single loan.
• Helps simplify financing for investors managing 5+ rental units.

Pros and Cons of Hard Money Loans for Rental Properties

✅ Pros:

✔ Fast Approval & Funding – Loans can close within 5-10 days compared to the 30-60 days required for bank loans.
✔ Flexible Qualification – Lenders focus on the property’s value and rental income rather than the borrower’s personal financials.
✔ Higher LTV – Some lenders offer up to 80-90% LTV, reducing the required down payment.
✔ Great for Investors with Limited Credit History – Lower credit score requirements compared to banks.
✔ Options for Long-Term Financing – Some hard money lenders offer DSCR loans for 5-30 years.

❌ Cons:

❌ Higher Interest Rates – Typically 7-12%, higher than conventional mortgages.
❌ Shorter Loan Terms – Many hard money loans are short-term, requiring refinancing into a permanent loan.
❌ Higher Fees – Origination fees, prepayment penalties, and closing costs can be higher than bank loans.
❌ Risk of Foreclosure – If the rental income doesn’t cover payments, investors risk losing the property.

Best Hard Money Lenders for Rental Properties

Here are some of the top hard money lenders offering rental property loans in 2024:

1. Kiavi

• Offers DSCR rental loans with up to 80% LTV.
• Interest rates starting at 7.5%.
• Loan terms up to 30 years.

2. Lima One Capital

• Provides long-term rental loans and bridge loans.
• DSCR loans up to 80% LTV, interest rates from 7.99%.
• No personal income verification required.

3. RCN Capital

• Rental portfolio loans for investors with multiple properties.
• DSCR loans up to 75-80% LTV.
• Fixed-rate terms 5-30 years available.

4. Optimus Capital

• Specializes in customized financing solutions for rental property investors.
• Provides bridge loans, DSCR loans, and cash-out refinancing.
• Offers flexible qualification criteria.

5. Visio Lending

• One of the largest DSCR lenders in the U.S.
• Offers 30-year rental loans with no income verification.
• Up to 80% LTV on purchases and refinances.

6. LendingOne

• Provides rental loans and portfolio financing.
• 30-year fixed options available.
• Interest rates starting at 7.99%.

How to Qualify for a Hard Money Loan for a Rental Property

While hard money lenders focus on property value and rental income, borrowers should still meet certain qualifications:

✔ Credit Score – Minimum 620-680 (some lenders accept lower scores).
✔ Down Payment – Expect to put down 10-25%.
✔ Property Value & Rental Income – The property should generate enough income to cover loan payments (DSCR of 1.0-1.25 or higher is ideal).
✔ Exit Strategy – Have a clear plan to refinance or pay off the loan when it matures.

Final Thoughts: Is a Hard Money Loan Right for Your Rental Property?

Hard money loans can be a powerful tool for real estate investors who need fast, flexible financing for rental properties. They are especially useful for:

🏡 Investors who need quick funding to secure a property.
🏡 Buy-and-hold investors who can’t qualify for traditional loans.
🏡 Property owners looking to refinance or expand their portfolio.

However, because of higher interest rates and fees, investors should have a clear plan for refinancing into a lower-cost loan or ensuring their rental income can support the payments.

• Country: United States