The 5 Best Hard Money Loan Exit Strategies for Real Estate Investors
Fast Approval. Faster Funding.
Funded
Not a broker
Rating on Google
1. Exit via Long-Term Refinance
When you start searching for a hard money lender in California, expect the lender to ask one critical question in the early stages of the pre-approval process: How do you plan to repay the loan?
Failure to present a clear, viable, and well-defined exit strategy can cause the conversation to end prematurely, leaving you to restart your search from scratch.
You see, hard money lenders aren’t just lending against your property; they are lending against your business plan.
They want to understand your strategy: what the money will be used for, a projected timeline, how the deal will generate a profit, and your planned exit from the loan.
In this guide, we outline five of the best exit strategies for real estate investors using short-term hard money loans in California.
2. Exit by Selling the Property
A simple and commonly used exit strategy by real estate investors is to sell the property.
After completing renovations or improvements, the borrower lists the property for sale and uses the proceeds to pay off the hard money loan.
This approach allows investors to capture the increased value created through upgrades or market appreciation, often resulting in a profit after loan repayment and closing costs.
It’s best suited for fix-and-flip investors but can be used by anyone seeking a short-term payoff rather than holding the property for the long haul.
3. Cash-Out Refinance
A cash-out refinance is another excellent, proven method for paying off a hard money loan.
This strategy works by investors increasing the property’s value through renovations or market appreciation, and once appraised at a higher value, the borrower unlocks built-up equity in a property by refinancing into a new, larger mortgage with a bank.
The money from the new loan pays off the existing hard money loan balance, and any excess funds are given to the borrower in cash.
Since this exit strategy provides investors with capital for future projects, without the need to sell any assets, it is regularly used by investors in conjunction with The BRRRR Strategy.
Consider a cash-out refinance if you want to keep a profitable investment while freeing up liquidity to reinvest elsewhere.
4. Sell Other Investments or Use Outside Funds
If the borrower doesn’t want to sell the property and isn’t able to refinance into another type of loan, the borrower can look to raise funds in other ways to pay off the hard money.
Selling other properties or liquidating investments may be the best option for a real estate investor, depending on their current and future investment objectives.
This strategy allows the investor to preserve their primary asset while maintaining flexibility to continue building their portfolio.
5. Bridge to Long-Term Rental Hold
A bridge to long-term rental hold strategy, also known as converting to a buy-and-hold, involves transitioning from a short-term hard money loan to permanent financing once the property is stabilized and producing rental income.
After completing renovations and securing tenants, the borrower refinances into a long-term loan, often a DSCR or conventional mortgage, based on the property’s income rather than personal income.
This approach allows investors to keep the property, generate consistent cash flow, and build long-term equity.
It’s ideal for those who start with a short-term project but decide to retain the property as part of their rental portfolio.
In Conclusion
As you can see, there are numerous proven and practical exit strategies to repay a hard money loan.
With a clear, data-backed exit strategy in place, your California hard money loan will put you on a path to long-term real estate success.
The key is to plan your exit before you begin the deal. Understanding exactly how you’ll repay the loan gives lenders confidence and benefits both parties.
By planning ahead, you position yourself not just to secure funding but to grow your investment portfolio strategically and sustainably.
Handpicked Resources
Hard Money Guide Bridge Loans
5 Hard Money Mistakes Investors Don’t See Coming... Until It’s Too Late Hard Money
How To Find The Best Hard Money Lender in California Hard Money
5 Reasons Why Hard Money Loans Get Denied Bridge Loans
The Ultimate Guide to California Hard Money Loans Hard Money
What is Hard Money?
About the Author
Russell Barneson Hard Money Lending
Russell is a seasoned real estate investor, writer, and hard money lending strategist, as well as the co-founder of Crescent Lenders. He holds a degree from the University of Southern California’s Marshall School of Business. Outside of work, Russell enjoys surfing and spending time outdoors with his dog, Amy.