Hard Money Loan

Hard money loans are short, expensive loans from private lenders, and the amount depends mostly on what the property is worth, with little weight on the borrower's income. Investors use it to buy and renovate properties that banks will not finance. Gross rent multiplier matters mostly at the end, when the property is rented and refinanced.

During the hard money period, the property may produce no rent at all. The plan usually depends on reaching a stabilized rent that, at the market GRM, supports a value high enough to refinance into a long-term loan and repay the hard money lender.

That makes the market GRM one of the plan's biggest assumptions. If the investor expects a GRM of 10 and comps come in at 9, the refinance loan shrinks and more cash stays in the deal. Stress-testing the plan at a lower multiplier shows how much room there is if the appraisal disappoints.

Further reading: Hard Money Loan on Wikipedia.