How Fast Can You Repay Your Hard Money Loan?

“I need a hard money loan for three months maximum,” I hear our potential borrowers say all the time. “I have the right partners, the right contractors, and we will be moving lightning fast.” “How many properties have you flipped in the last two years?” I always ask them. The answer is typically none.

Please don’t take me wrong. As a hard money lender, I am all for hard-driving borrowers willing to pour their energies into a project. We’ve written extensively how to avoid delays and save money by repaying your hard money loan as quickly as possible. But you also need to have a healthy dose of realism. Unless you consistently finish and sell your rehabs within three months, don’t base your numbers on hopes and aspirations. Instead, they should be based on an average turn-around time of six to nine months. Challenge yourself to do it in a shorter time; if you do, pat yourself on the back and consider it a bonus. However, establish a track of record first. Once you consistently rehab and sell properties quickly, start basing your next projects on your personal record.

If you are basing your fix-and-flip profit projections on the best scenario, you will likely be disappointed.

Let me explain why the chances of repaying a hard money loan within three months are slim by reverse-engineering the process. Your buyer will need at least forty-five days to secure financing in today’s market. That is, if everything goes smoothly. If their funding falls through, you are looking for six weeks or more before you can sell the property and repay your hard money loan. But let’s assume you’ve got an extremely qualified buyer who’s cruising through the underwriting process. If your aspiration is to repay your hard money loan in three months, that means you have only forty-five days to renovate your property and market it to potential buyers. Do these numbers look realistic to you? For me neither, but let’s break them down even further.

How fast you can repay your hard money loan depends on the real estate market conditions in your area.

In real estate, marketing time is measured in days on the market, commonly abbreviated as DOM. The days on the market start when your realtor activates your property in MLS. The count stops when your contract is ratified, or your listing is removed. DOM can vary significantly by location, property type, and market conditions. For example, in November 2024, it took 27 days to put a house under contract in Montgomery County. At the same time, it took fifty days to ratify a contract in the city of Baltimore, compared with 43 days in Washington, DC. If your property is fully renovated and priced well, it is more appealing than an average listing. However, you would still need to budget at least a month to find and negotiate with a suitable buyer.

So, let’s count what we got so far. We have 45 days for the buyer to secure financing. We need to budget 30 days for you, the seller, to find a buyer. It leaves us with around two weeks to finish the entire rehab. Is it really realistic?

Your rehab project depends on many people. Be realistic about their schedule.

These two weeks can be unpacked even further. It will take your realtor a day or so to list the property. If you use a professional photographer to take flattering pictures of your renovations, you need to budget at least a few days to work around your photographer’s schedule. Landscaping is the last thing to be done in every rehab and takes at least three days to arrange – even if the work itself can be done in a day. So, our actual renovation time is reduced even further.

Let me set the record straight. We do have several borrowers capable of turning their projects extremely quickly. They are experienced rehabbers with their dedicated crews. They work in partnership with real estate agents or are licensed themselves. Their team is a well-oiled profit machine with its own preset interior and exterior designs and time-tested marketing strategies. These folks are professionals who can typically repay their hard money loans in less than six weeks. They are also exceptions to the rules.

As we discussed in our previous blogs, basing your profit calculations on the best-case scenario is a sign of an inexperienced investor. Inexperienced investors are bound to make mistakes. Those who are wise will learn from them, becoming faster, leaner, and smarter as they gain experience. But for now, give yourself ample time to finish the renovations and market the property. Do not dilly-dally, do not procrastinate, and move with a purpose and a sense of urgency. But whatever you do – face the reality and plan for it.

In conclusion, while ambition and drive are critical qualities for successful real estate investors, they must be balanced with realism and careful planning. Aspiring to repay a hard money loan in three months is admirable, but unless you have a proven track record and a seasoned team, it’s unlikely to be realistic. By accounting for average timelines and potential delays, you’ll create more accurate profit projections and reduce the risk of financial strain. Remember, experience is the best teacher. As you grow in this business, you’ll develop the skills, efficiency, and network to accelerate your timelines. For now, focus on building a solid foundation, and success will follow.

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