Banks hate unfinished properties – Most conventional lenders either will not lend on property that needs substantial work (and by that we mean more than paint and carpet), or will make it so difficult for the investor to borrower the money that the investor just gives up and goes to a marketplace better prepared to manage this type of loan – the hard money markets.  Hard money lenders are the best option in these cases because they understand rehab projects or lending on purchasing land. And because most properties are local to the private mortgage lender, hard money lenders are best suited to protect the lender’s money in the event of default.
Borrowers need short-term lifelines – Sometimes it could be as simple as a borrower needing to use money to leverage into another hot real estate deal, but unable to secure bank financing because of negative credit marks, insufficient cash on-hand, etc..  If there is sufficient equity in the property and a proper exit strategy for the borrower, a hard money loan is a perfect solution.
