Leverage High End Real Estate Investments with Hard Money
Hard money is regularly used for high end real estate. You might think of hard money for lower end properties, but actually, our average hard money loan amount at Little City is over $500k and it’s approaching $1MM quickly. Hard money lenders like Little City don’t require the monthly income that a bank would require to get a loan in this range. You do need a lot of equity and it helps to have excellent credit, a successful track record, and some cash on hand.
Hard money isn’t just for basic fix and flips in the low to median price range for the area. Lots of hard money lenders will lend on higher end properties, and some of us even prefer it. Just know that you need to be in the middle of the market you’re in, not aiming for the tip-top of what’s theoretically possible.
Central Austin, for example, is a high dollar area where even the smallest homes and even vacant lots regularly sell for over 1MM. Remodeled and new homes retail for $3MM+. A flip in central Austin might be at a cost of $1.5MM and retail for over $3MM. Most hard money lenders would be happy to lend 70% or $2.1MM on a project that appraises for $3MM.
Of course there are some single family residential sales over $10MM in the Austin area, but since this is such a small part of the market in 2025, it’s not an easy thing to lend on. The LTV will probably be reduced in this range, and the project could be outright rejected if there aren’t enough comparable sales. In short, your investment property can’t be an outlier if you want to use a hard money loan.
Market Range for High End Real Estate Hard Money Loans
Hard money loans are limited more by market factors than dollar amounts. We like to lend in price brackets that have substantial buyers and make sense for the market they’re in. If you’re trying to sell a $5MM spec house in a market where there have not been many $5MM sales, you will probably find that project requires substantial cash.
If you build a $5MM spec house in a market where homes regularly sell for $4MM to $7MM you will have a much better chance at borrowing from a private or hard money lender than if your target market has only seen sub-$4MM sales in the last year.
Beware of Outliers – Hard Money Obstacles in High End Real Estate
Outliers are likely to be rejected by hard money lenders. Your build or remodel project needs to be in the middle of other similar sales, not substantially higher. Even if it’s nicer and larger, most lenders are not going to accept that it’s destined to be the highest recent sale in the area. You need comps higher than your target sales price to justify your as-built price as conservative.
In a market where the premium properties go for $5MM or more, a normal hard money loan might easily be $3MM. The key is to have valid comparable sales and not ever expect your property to sell for substantially more than the competition.
Some luxury builders are able to set sales price records with their sales, which is amazing, but your hard money lender is going to look at past sales (only) to assess as-built value, not the possible, future, shoot-for-the-moon price. The as-built value that the lender lands on will be a strong factor in determining how much they can lend you.
Higher Barrier to Entry
Credit and liquidity requirements are higher for $1MM+ hard money loans than they are for loans under $500k. Hard money lenders rarely consider income in the way a bank would, but you do need to show an ability to make the payments. You’ll also need credit that substantially exceeds the minimum for sub-$500k loans (currently 550), and we strongly prefer credit is in the top range for loans this size.
If your credit or cash reserves are less than ideal in the lender’s eyes, you might be offered the hard money loan at a lower loan to value, or the lender might require an interest reserve. Both of those would typically require more cash out of pocket to do the project.
Conservative As-Built Value
Hard money with high end real estate depends on a conservative as-built value. If you’re conservative about your as-built value, using a hard money loan for a high end luxury build or remodel can be a useful solution, especially in combination with a cash contribution.
Many of our borrowers use Little City funding to make the property purchase, then make improvements with their own funds. This is a great balance to reduce your cash outlay but not borrow more than you need. Great article with details on maximizing leverage on a flip property at this link.
Payment Planning for High End Hard Money Loans
The obstacle to these loans for a lot of real estate investors is that you typically need cash on hand to make the interest payments. A $1MM+ loan has pretty large payments. If you borrow $1MM from Little City at our current rates, your payment with the property tax escrow will probably be around $13,000 per month. Not a small amount to pay every month on top of your renovation costs, utilities, and insurance. That makes $156k per year in interest and property taxes only.
The good news is a hard money lender won’t typically require the income that a bank would want to see to lend you over $1MM. Since the interest payments and property taxes total over $150k per year, even if you had no other debt, a bank would probably want tax returns showing $445k+ of annual income to qualify you for the loan. They’d want even more income if you have other debt. Hard money lenders are able to make high end real estate loans without the income requirements.
You may have the opportunity to roll some of your interest payments into your hard money loan. This makes the first few months less daunting since it delays the out-of-pocket payments. It requires more equity to roll in payments but it is certainly possible if the loan to value remains low.
Little City offers hard money loans for high end real estate to experienced borrowers and builders. $1MM to $4MM is our preferred range for single family real estate investments, but we will consider larger loans for multi-family projects, for commercial properties, and on a case by case basis.