First of all a majority of hard money banks let you to borrow up to 65% of the value of the property. If it is for rehab purposes, the lender will use the “after-repaired value” of the house as a frame of reference. I have seen on occasion that went as high as 75% but 65% is the norm.

These loans are very situational and very flexible so there is some wiggle room if the package makes sense. It can be a strike against you if you are new to the game but fortunately that can usually be offset with sufficient cash reserves and a good plan of action.

Let's take a look at an investor rehab loan to see how the numbers work.

Let's say you came across a beat up old house in a decent neighborhood where homes sell for $100,000. The seller walks you through the home and you determine that the property needs approximately $12,000 in work. You've gotten pre-qualified for a rehab loan and know you are wondering what is the maximum you should pay for the subject property.

To keep it basic, you will want to take $100k x 65% - loan costs – repair costs/holding costs = Purchase price. Loan costs, for hard money loans, may run from 8-13% of the total loan amount. They are not cheap but it's less money than you'll pay to a partner! For now we can assume costs of 10% and holding costs of $2,000. Given those numbers, you probably shouldn't invest more than $45,000 for the house. If you pay more, that just means more money out of your pocket to get the deal done.

Here are a few great tips you can use to maximize the likelihood of being approved for hard money loans, in general:

1. The more equity in the investment property after the loan, the better,

2. The higher your credit score, the better

3. The more credit history you have, the better!

4. The more liquid assets you can prove that you have personally or have guaranteed access to (lines of credit, partners, rich uncles.. .) the better

5. The more populated the area, the better

6. The faster the properties in that area sell, the better

7. The more solid the appraisal value, the better! A lot of hard money lenders like to use fire sale values as the basis point of the loan so don't be shocked. This is definitely not the time to use inflated values.

All in all, this is a numbers game. Don't get attached to a home if the numbers don't make sense. Hard money lenders can be flexible but bring them a deal where the numbers don't add up and it could cost you a relationship. Credit doesn't always matter but it does help, tremendously, if you can show good credit history.