How Austin & Florida Investors Are Escaping Their Hard Money Headaches

In 2021 and early 2022, buying real estate felt like a race. Demand was explosive, mortgage rates have never been lower, prices skyrocketed, and investors in cities like Austin and Miami rushed to get in before being priced out forever. But when traditional financing couldn’t keep up with the pace of deals, many investors turned to hard money loans—fast, flexible, and risky.

Now, several years later, the market has changed—and many of those same investors are stuck. Prices are down, inventory is sitting longer, and those hard money loans are coming due. The question is: What can you do now if you’re holding a property you can’t sell and a loan you can’t afford?

At LendFriend, we’ve already helped multiple investors avoid catastrophic outcomes by refinancing out of their hard money loans. Here's what we’re seeing and what you can do.

How We Got Here: From Housing Market Frenzy to Freefall

The pandemic years turned cities like Austin and South Florida into real estate gold rush zones. Prices soared, inventory vanished, and investors—especially from out of state—saw an opportunity to cash in. In Austin alone, roughly 30% of all home purchases in 2021 were by investors, many coming from places like California and New York. These weren’t just casual buyers—they were flippers, short-term rental hopefuls, and portfolio builders convinced the ride would never end.

And for a time, it worked. According to Redfin data cited by Newsweek, Austin's median home price climbed more than 60% from early 2020 through May 2022. The frenzy hit its peak with luxury properties in Lake Austin seeing list prices drop by as much as 50% by early 2025, showing just how inflated the top of the market had become.

But the market couldn’t sustain the pace. Once the Fed began hiking rates to curb inflation, everything changed. Mortgage rates more than doubled. That crushed affordability—not just for end users but also for investors relying on leverage. Short-term rental revenues began falling as markets became oversaturated. And with inventory in Austin reaching the highest levels in nearly a decade, per Newsweek, the supply-demand balance flipped.

In South Florida, the reversal came with its own warning signs. As migration slowed and new construction outpaced demand, analysts began drawing comparisons to the 2008 crash. According to Newsweek, oversupply, fading demand, and affordability pressures have sparked fears of a prolonged downturn across the Sunshine State.

Now, many of those same investors who once planned to flip or hold properties for a few years are stuck. They're underwater on homes that no longer cash flow, holding hard money loans with 12%+ interest and looming balloon payments. It’s a dangerous position to be in—especially when exit options are shrinking by the day.

Why Hard Money Loans Are So Dangerous, Especially in This Housing Market

Hard money loans were never designed for the long term. They’re best suited for experienced investors with a well-defined, short-term strategy—like rehabbing a property and selling within 3–6 months, or executing a cash-out refinance once the property is stabilized. What makes hard money so appealing is that it typically doesn’t rely on personal income, employment, or even strong credit. The property itself is the qualification. If the numbers work on paper, the loan gets funded.

That speed and simplicity made hard money an investor favorite during the boom—especially in competitive markets like Austin, where making a cash-equivalent offer was often the only way to win a deal. But it’s a tool that only works when the timing is right. And when the market turns, as it has in 2025, the risks multiply quickly.

Here’s why hard money loans can become dangerous liabilities:

• Interest rates of 12–15% create a massive monthly burden—sometimes thousands more per month compared to conventional financing.
• Balloon payments due in 6–12 months can trigger default interest, forced sales, or foreclosure if the loan isn’t paid off on time.
• No reporting to credit bureaus means that even if you make every payment on time, it does nothing to improve your credit.
• Loan terms are rigid. There’s very little room to renegotiate if your plan changes or the market shifts.
• Massive penalties—we’ve seen loans with $100 per day in late payoff penalties, which stack up quickly if you can’t exit in time.

Unlike conventional or even non-QM loans, hard money doesn’t reward patience or flexibility. It’s designed for short bursts, not long holds. And when you can’t refinance, can’t sell, and can’t cover the monthly interest out of rental income, the math stops working. That’s when we start seeing fire sales, credit damage, or even investors walking away from deals entirely.

If this sounds familiar, you’re not alone—and you’re not without options. There are better paths forward, and we can help you find them.

Why Selling The Investment Property Isn’t an Option for Most

It sounds simple—just sell the property and walk away.

But for many investors holding properties financed with hard money loans, the market has made that exit strategy nearly impossible in 2025. These homes were often bought at or near the peak of the market, and the financing used to acquire them—often with minimal documentation or long-term viability in mind—was built on the assumption of quick appreciation or strong rental income. Neither materialized the way investors hoped.

Here’s what’s really happening in Austin and South Florida:

• They owe more than the property is worth. Home values in investor-heavy areas like Austin have fallen as much as 30% from their peak, according to Newsweek. That means a property bought for $750,000 might only appraise for $525,000 today—yet the loan balance could still be in the $600,000s or higher.
• Even if they could sell, they’d have to bring $50K–$150K to the table to satisfy the loan payoff. For most investors, that kind of liquidity isn’t available—especially if they have multiple properties.
• They’ve already tested the market. Many of these properties have sat on the MLS for months—120+ days on market isn’t uncommon—without offers. Investors have tried price drops, staging, and even offering concessions. But with buyers spooked by high rates and rising taxes, the demand just isn’t there.
• Carrying costs are draining reserves. With hard money rates often over 12%, plus taxes, insurance, utilities, and maintenance, it’s not unusual for investors to be bleeding $4,000–$6,000 per month, per property. Those losses are unsustainable.
• Renting it out isn’t enough. Many investors bought with the idea that short-term or mid-term rental income would cover costs. But platforms like Airbnb have become oversaturated in key markets, and regulations in both Austin and Miami are making it harder to count on those earnings. Long-term rental income often doesn’t cover hard money interest payments—let alone the balloon balance.
• Waiting doesn’t guarantee a turnaround. Some hoped rates would fall in 2024 or early 2025, but the Fed has signaled only slow, cautious cuts. Meanwhile, analysts now believe the Austin market won’t bottom until late 2025 or even 2026, and Florida's overbuilt regions are showing early signs of a protracted downturn similar to 2008, according to Newsweek.

In other words, many hard money borrowers are stuck in a holding pattern with no safe exit in sight. Selling isn’t just difficult—it’s financially devastating. That’s why the conversation needs to shift from "Can I sell?" to "How do I refinance before it’s too late?"

The Better Solution: Refinance (Even If You Think You Can’t)

Yes, rates are still high—but they’re not 12% high.

We’ve helped clients reduce their monthly payments by thousands, avoid six-figure penalties, and secure a loan they can ride out for years. Whether that’s a conventional loan, a non-QM product, or a DSCR (Debt Service Coverage Ratio) loan, there are real solutions available.

Hard money might have been your only option then. It’s probably not your best option now.

How Going Conventional On Your Refinance Makes Sense

With a conventional refinance, lenders qualify you—not just the property. That means they review your credit, your income, your debt-to-income ratio, and your ability to repay. This underwriting style is completely different from hard money, which only cares about the property’s value.

This is especially helpful right now in markets like Austin, where falling rents have made DSCR loans harder to qualify for. According to The Texas Tribune, rents in Austin have fallen for nearly two years straight due to oversupply and a softening job market. If your rental income isn’t strong enough to cover the loan payment, a DSCR loan might be out of reach—but a conventional investment refinance might still work if your personal income qualifies.

And you don't have to have to keep it as an investment property. One of our borrowers just financed his hard money investment loan into a conventional primary residence because he decided to move into the home after he couldn't sell his own flip. Instead of a nearly 8%  mortgage rate on a conventional investment loan, he got a 6.25% on a conventional primary - and he loves the house. Win-win.

What About DSCR Loans?

DSCR loans may be a good option—if (and only if) your rent roll supports it. These loans base qualification on the income the property generates, rather than your personal income. But with rent declines in many investor-heavy neighborhoods, it’s not always a fit unless your numbers are strong.

That said, some properties still cash flow well, especially if the purchase price was lower or if the investor has made improvements. If your rental income covers the monthly payment at a 1.0x ratio or higher, a DSCR refinance may still be in play.

Keep in mind however, you might not like the mortgage rate on a DSCR loan in this market. 

Other Non-QM Solutions

If your income is hard to document, we also offer bank statement loans that let you qualify based on your actual cash flow rather than tax returns. These programs are ideal for self-employed investors or business owners who take large write-offs. With 12 or 24 months of personal or business statements, we can often document enough income to get a non-QM loan approved.

Bottom line: You have more refinancing options than you think. The key is working with a lender who can evaluate them all—and that’s where LendFriend comes in.

Why Working With a Mortgage Broker Makes the Difference

Here’s where brokers like LendFriend shine.

Unlike direct lenders or traditional banks—who often stick to a narrow set of loan products and rigid guidelines—we shop your loan across dozens of wholesale investors. That gives you more flexibility with guidelines, appraisal options, creative structuring, and real solutions tailored to your situation. Banks often shy away from loans like these because they’re messy. Hard money exits, layered ownership, falling rents, multiple appraisals—it’s too risky and time-consuming for a retail lending department.

Retail banks are built for plain-vanilla borrowers. They want perfect credit, W-2 income, strong reserves, and properties that appraise on the first try. Anything outside the box? They either deny it or drag it out so long that the borrower gives up.

At LendFriend, we live in the grey areas. Our team works with multiple lenders simultaneously to find the right angle—whether that means ordering a second appraisal, using projected rents instead of current leases, or combining multiple income sources. We have access to non-QM investors, DSCR lenders, and private capital channels that banks won’t touch.

Take our client in Austin as a perfect example:

Austin Case Study: From Hard Money Headache to Refinance Relief

• Original Loan: $585,000 hard money loan on a $750,000 property (in 2022)
• Current Rate: 12% + $100/day in default penalties because it was past maturity
• Exit Plan: Sell. But after 120+ days on market, even with price drops, no offers came in.
• Appraisal: First appraisal came in too low to refinance. Most lenders would stop there.
• Solution: We helped him secure a second appraisal through a different lender channel—came in at $675,000
• Refinanced Loan: $540,000 at 7.875%, interest-only
• Result: Avoided MASSIVE balloon/default fees, significantly lowered monthly payment, and bought time to rent or sell later.
• Pro-tip: This borrower negotiated his payoff so his lender ended up eating $35,000 of losses. The borrower only ended up having to come out of pocket $10,000 to payoff his lender in excess of the new mortgage.

This flexibility and multi-lender strategy is only possible through a mortgage broker—not a retail bank or a direct hard money lender.

Conclusion: Don't Let a Bad Loan Sink a Good Investment

If you’re holding an investment property with a hard money loan in Texas or Florida, now is the time to reassess. Hard money loans were designed for fast flips in hot markets—not long-term holds in volatile ones. The longer you wait, the more expensive it gets. Trust me, these lenders are not people you want to be on their bad side.

But there’s good news. There are smarter options available, and working with a broker like LendFriend gives you access to them.

Remember this: Real estate has historically rewarded those who can afford to hold. Whether you’re waiting for prices to recover, rents to rise, or simply the right buyer to emerge, the key to success is staying in the game. But you can’t do that with a ticking time bomb of a loan.

You need financing that lets you breathe—not one that bleeds you dry every month. You need a structure that supports the long haul, not just the first 6 months. And that’s exactly what we help investors secure.

Whether it’s a conventional loan, a non-QM solution, or DSCR financing down the road, we’ll help you exit the hard money trap and create a path forward. Don’t let the past keep you stuck—refinance now while values are still holding and before penalties escalate further.

Want to talk through what refinancing a hard money loan looks like for you? Give us a call at 512.881.5099 or get in touch with me by completing this quick form, and I'll reach out as soon as possible.