Real Estate Rookie – Episode Summary

Podcast: Real Estate Rookie
Episode: This is How “Hard Money” Loans Work (Banks for Investors) (Rookie Reply)
Hosts: Ashley Kehr and Tony J. Robinson
Date: October 17, 2025

Episode Overview

This episode of Real Estate Rookie delivers a detailed breakdown of how hard money loans operate and the practical nuances of financing your first investment deal. Hosts Ashley and Tony answer listener questions on getting deals funded, competing with other buyers, weighing local versus out-of-state investing, and structuring partnership agreements—especially when working with family members. Throughout, the show maintains a welcoming and educational tone, focusing squarely on the needs and concerns of rookie real estate investors.

Key Discussion Points & Insights

1. Losing Your First Deal & Making More Competitive Offers (00:30–07:31)

• Listener Question: Jeremy lost out on his first deal to a family buyer and wonders how to make his offers more competitive, as well as the realism of getting close to 100% of ARV funded by hard money lenders.

  Insights:

  • Competing as an Investor: Losing a deal to a family (especially on a foreclosed or HUD property) is common, and often banks favor owner-occupant bids.

    • Ashley (01:57): “I feel like a bank is just non-emotional and just picks the highest, but this could have been a HUD house where there’s a period of time only for primary residents.”

  • Making Offers More Competitive:

    • Price: Bid more if you can, but consider if it still fits your investment goals.
    • Speed: Offer a fast closing, or even flexible closing to suit sellers' timelines.
    • Contingencies: Reduce or remove them where possible (but don’t skip inspections if you’re a rookie).
    • Earnest Money: Increase your EMD to show seriousness.
    • “Leave the Junk” Offer: Offer to clear out anything the seller leaves behind, lightening their load.
      • Ashley (04:27): “Those are things that it works great to offer…they can take what they want, the rest they can leave. You’ll take care of it.”

  • Inspections: Keep inspections for your own protection, but you can state you won't request repairs, just want confirmation on your numbers.

    • Ashley (06:41): “As a rookie investor, especially in today’s market, one thing I would not skip is to do the inspection.”

2. Understanding Hard Money Lending Terms (07:51–14:13)

• Jeremy’s Question (continued): Is it realistic to get nearly 100% of ARV covered for rehab and other costs? Why are there such gaps in coverage?

  Insights:

  • Hard Money Lender Basics: Most want you to have "skin in the game"—some investment of your own money as incentive to complete the deal.
    • Typically lend 90% of purchase price or cost, or 65% of ARV, whichever is less.
    • Tony (08:47): “Typically, what you’ll see…is that they want you to have ‘skin in the game’…If you have nothing in the deal, that’s a little bit more risky for us.”
  • Experience Matters: Newbies get more conservative terms; experienced investors often qualify for better rates.
  • Personal Experience: Ashley recounts a negative experience with a nationwide hard money lender—multiple contacts, unexpected fees, mandatory appraisals, and refinancing restrictions, especially challenging in New York.
    • Ashley (10:16): “It was the worst experience of my life... There wasn’t one central contact person—it was just too many hands in the pot.”
  • Advice: Always ask very specific questions about process, fees, local experience, and refinancing before engaging any hard money lender.

3. Local vs. Out-of-State Investing & Researching New Markets (16:52–27:59)

• Listener Question: Craig from California asks whether to invest locally (where he can self-manage and do repairs) or out-of-market (where deals might pencil out better but have travel and management costs).

  Insights:

  • Calculating True Returns: Commendation for factoring travel and management time/costs. Don’t follow the 1% rule blindly—account for all property-specific expenses like taxes.
    • Ashley (17:34): “Congrats on even considering [travel/time costs] because that does add up…don’t get caught up just because a property doesn’t meet the 1% rule.”
  • Motivation Matters:
    • If you want cash flow now, higher-yield distant markets may make sense.
    • If you’re investing for long-term appreciation or diversification (and love your day job), local markets may be fine with thinner margins.
    • Tony (19:40): “If you love what you do…and don’t need the cash flow today…who cares about the 1% rule as long as you’re net positive.”
  • Due Diligence is Non-Negotiable:
    • Don’t be afraid to budget for travel; seeing properties in person is wise, especially for rookies.
      • Ashley (22:05): “If you’re buying a $500,000 property as your investment, you can buy a $500 plane ticket as part of your due diligence.”
    • Ashley and Tony recommend at least 1–2 trips per year to out-of-market properties.
      • Tony (24:52): “Recently, it’s probably been about once a year that we go through and check on the properties where we have to travel.”
  • Market Research: Focus on data (price-to-rent ratios, job growth, population trends). Use online resources—Tony recommends searching for his old spreadsheet in the “Real Estate Rookie” Facebook group.
  • Finding Agents: Use the BiggerPockets Agent Finder to connect with investor-friendly professionals.
    • Tony (26:57): “You can get connected…through the BiggerPockets agent finder...I found [my agent in OKC] through there.”

4. Structuring Partnership Contracts With Family (31:00–39:18)

• Listener Question: Dustin wants advice on formalizing a partnership contract for a brrrr purchase with his brother and step-father.

  Insights:

  • Put Everything in Writing: Don’t rely on verbal understandings; anticipate issues before they arise.
    • Tony (31:00): “A lot of it comes down to your ability to have the difficult conversations up front and get it all written down and memorialized.”
  • Cover Every Scenario: Address what happens if someone wants out, fails to perform, passes away, runs out of money, goes bankrupt, or other potential “deal breakers.”
  • Beyond the Contract:
    • Think about dispute resolution outside of court—creative ideas include an advisory board or quarterly alignment meetings.
      • Ashley (32:51): “What are other things you can do to be proactive?…having a quarterly meeting where everybody is presenting what has happened, what they’ve done, what is happening...”
    • Propose regular “alignment meetings” and involving spouses where possible.
      • Ashley (36:58): “Steve Rosenberg always recommends...alignment meetings to make sure you’re all on the same page, and incorporate your spouses.”
  • Compensation Clarity: Decide if roles are compensated or part of equity shares to avoid future misunderstandings.
    • Tony (37:28): “It is important to clarify compensation…that can be a sticking point—just clarity…is big as well.”
  • Always Use an Attorney: Even if you work from a sample contract, having a legal professional draft or review it is crucial.

Notable Quotes & Memorable Moments

• On Losing Out to Other Buyers:
  Tony (01:57): “He didn't really lose the deal. It's not like he had it under contract and something fell apart. He just got outbid by someone else.”

• Making Offers More Appealing:
  Ashley (04:27): “Maybe it was a hoarder house and they’re just starting fresh. Those are things that it works great to offer…They can take what they want, the rest they can leave.”

• On Inspection Contingencies:
  Ashley (06:41): “As a rookie investor…one thing I would not skip is to do the inspection…You just want to make sure that what you’re estimating is going to be correct.”

• On Hard Money Lending:
  Tony (08:47): “They want you as the buyer to have, quote, unquote, skin in the game. For them it’s like, hey, if you have nothing in the deal, that’s a little bit more risky for us.”

• Bad Lender Experiences:
  Ashley (10:16): “It was the worst experience of my life…I did not ask enough questions…[they] didn’t even know how to close in New York.”

• Budgeting for Out-of-State Investing:
  Ashley (22:05): “If you’re buying a $500,000 property…you can buy a $500 plane ticket as part of your due diligence.”

• On Tracking Market Data:
  Tony (24:52): “When I was trying to figure out what market to research, I had this massive spreadsheet…with a bunch of different MSAs.”

• On Partnership Structure:
  Tony (31:00): “Have all those difficult conversations. What happens if someone's sucking at their job?... Get it all written down and memorialized.”

Timestamps for Important Segments

• [00:30] – Introduction of Jeremy’s question about losing a deal and hard money lending
• [03:15] – Strategies to make offers more competitive
• [07:51] – Deep dive on hard money lending terms and Ashley’s experience
• [16:52] – Craig’s question about local vs. out-of-area investing and due diligence
• [19:40] – Tony discusses prioritizing cash flow versus long-term gains
• [23:44] – Discussion on how often to visit out-of-state properties
• [26:57] – Tips on vetting agents in a new market
• [31:00] – Dustin’s question about partnership contracts and family
• [36:58] – “Alignment meetings” for partnership communication
• [39:18] – Importance of legal review for contracts

Takeaways

• Don’t get discouraged by losing an early deal. Focus on learning and improving your offer strategy.
• Research and ask questions before choosing a hard money lender, and always be clear on terms and local expertise.
• Out-of-market investing can work—if you factor in your real travel/management costs and do deep research before jumping in.
• Transparent partnership agreements and proactive communication (including professional legal review) are crucial, especially with friends or family.

For more rookie-focused real estate education, tune in to Real Estate Rookie by BiggerPockets every Monday, Wednesday, and Friday.