Hard Money Lending 101
an interview with Luke Hanscom of H1H2 Capital
In this edition of The AHA! Moment, I’m joined by Luke Hanscom, Senior VP at H1H2 Capital, a leading private lending firm specializing in fix-and-flips and new construction loans. Luke has been instrumental in H1H2’s evolution since its founding in 2018, and today, he’s sharing his expertise on how investors—both new and experienced—can leverage hard money to fund their deals, navigate market uncertainty, and avoid common financing pitfalls.
We cover the hard money lending process and how it works, who should use hard money loans, the biggest mistakes new developers and investors make when financing their first flip, how to navigate unique property challenges and secure funding, and market trends and opportunities in today’s real estate landscape
Luke is an incredible resource, and he makes the process feel way more approachable—so if you’ve ever had questions about how to get started, read more below and be sure to listen to the full conversation on The AHA! Moment Podcast!
Tell us about yourself, what you do, and the story of H1H2 Capital!
I'm Luke Hanscom. I'm one of the partners at H1H2 Capital. We do fix and flip loans and new construction loans for the most experienced developers and folks who are just trying to start out. We help people get into these projects that, our investment property. So nothing owner-occupied. You know, homeowner stuff, all investment property value, add real estate, and one to four unit per property transactions. So no crazy big apartment buildings and, you know, mixed-use complexes and anything, you know, super complicated, just basic residential real estate.
Our company's based out of Massachusetts. We've got the three partners situated all around the city: Woburn, Braintree, and another in Weston. We've got the city surrounded and we do most of our stuff within, I would say 45 minutes or so kind of band around Greater Boston. Then we have a presence in Connecticut, a presence in Florida, and a little bit of a presence in Texas.
We've really changed the business over the last like year and a half or so. In 2018, formally H1H2 started and it was really more of an investment vehicle for personal finances and some syndicated debt going into real estate deals in other parts of the country that this was kind of a side project or a secondary source of income for the original founding partners of H1H2. Then, as the company progressed over the years, they've got a little bit more involved. The fund got bigger projects, got a little bit more elaborate, more money was coming in and different decisions were made to eventually put us where we are now, which is doing first position debt lending as opposed to like equity partnerships or trying to do some different second position type loans. Most of our stuff now is at bread and butter. First position, you know, first mortgage for a fix and flipper. That transition from 2018 slowly and then really over the last, I'd say two years, we've been full steam ahead in the just truly first position lending space.
How can first-time investors and developers qualify for hard money loans?
I would say the easiest way for your very first time is making sure that your renovation budget is, I'd say somewhere between the 25 to 30% of what you're buying the house for. Say, just for round numbers, you're buying the house for $100,000. If your renovation budget is $25,000 to $30,000, that should be considered a reasonably light lift for a flip. You’re probably not taking the roof off or putting an addition on or requiring any crazy permits or going through any type of historic approval process or anything that's gonna really challenge your timeframe of just proving the concept, Hey, I can buy this, I can renovate it and I can make money on it. That's for your first one. That's all you're trying to do. You're trying to show yourself and your partners and your lenders and everybody else that you're working with: hey, I've got a plan and I can execute it.
Then, be sure the credit’s there, budget's reasonable and, and you're gonna get through the project quickly. That's your best bet for your first one. So I'd say have a respectable 720 plus-ish credit score, and have that budget be 25 to 30% of what you're buying the property for initially, and you’ll be in good shape.
Why work with H1H2?
The products are relatively the same, the somewhat institutionally backed or scalable lending option. There's probably four or five of us that you could go work with that are pretty similar in what they're gonna charge you, what type of loan you're gonna get and how that's all gonna go.
But just like anything else, you work with somebody that you want to work with. Our biggest asset to somebody is that we're going to take enough time to slow down and really look at what you’re doing. How could we get creative and put you in the best position to succeed if you're a new developer. I think we probably do have the best product from a loan size standpoint. I don't think anybody else will give you the leverage that we're willing to do.
If you're an experienced developer, I think our new construction product is the best in the country and I don't think it's close. So if you're looking at doing a non-bank loan for a new construction project and you're not letting us quote it you're crazy. We're putting out some really, really competitive terms in that space. Term-wise, we're really good and we get those good terms because we're taking time to understand the deals and creatively structuring these things and figuring out, hey, what are you solving for?
We are small, we're local, we have that true relationship and connection with people that we work with where they're not just a number, they're not a statistic. It's not, oh hey look at me. I just closed another loan today and counting all the milestones of us. We're not worried about our scoreboard in that regard. We know that if we do right by our customers, our growth will come. We're always celebrating our client's success versus our own. And I think that says a lot about the type of lender that we are.
Where can people find you online?
Instagram: @luke_hanscom @h1h2capital
Cheers,
Angelina