How to Structure Your First Hard Money Deal in Alberta
Private hard money is the ultimate scaling tool for real estate investors. It provides speed, certainty, and access to distressed deals that traditional banks reject.
However, entering the world of private capital requires a shift in mindset. You are no longer navigating rigid bank algorithms. You are structuring an asset-based business partnership.
Here is your step-by-step guide to structuring your first hard money deal in Alberta.
Step 1: Master the LTV Thresholds
Traditional banks underwrite your personal income. Private lenders underwrite the property.
The core metric of any hard money deal is the Loan-to-Value (LTV) ratio. It represents the lender's risk exposure relative to the property's value.
As-Is LTV vs. After Repair Value (ARV)
As-Is LTV: The loan amount relative to the property's current purchase price or current appraised value.
ARV LTV: The loan amount relative to the property's projected value after all planned renovations are completed.
In Alberta's primary markets like Calgary and Edmonton, private lenders typically cap initial acquisition loans at 70% to 75% As-Is LTV.
Having "skin in the game" is non-negotiable. Your down payment (typically 25% to 30%) anchors the deal and aligns your interest with the lender.
Step 2: Establish the Rehab Draw Schedule
If you are executing a Fix-and-Flip or BRRRR deal, you need capital for renovations.
Private lenders do not hand over 100% of the renovation budget at closing. Instead, funds are released in staged draws based on completed work.
How the Draw Process Works:
Scope of Work (SOW): You submit a detailed itemized budget and timeline before closing.
Self-Funded Initial Stage: You complete the first phase of renovations using your own working capital.
Site Inspection: A lender representative or inspector verifies the completed work.
Fund Release: The lender releases the draw to reimburse you for the completed stage.
Tip: Always keep a liquid cash reserve equal to your first renovation stage to avoid project delays.
Step 3: Map Out a Ironclad Exit Strategy
A hard money loan is a high-velocity financial bridge, not a permanent mortgage. Every private lender requires a clear, viable Exit Strategy before approving a single dollar.
Primary Exit Strategies in Alberta:
The Flip Exit: Sell the renovated property on the open market and pay off the principal balance.
The Refinance Exit: Stabilize the asset with a tenant and execute a long-term refinance into a lower-rate traditional mortgage.
The Asset Sale Exit: Liquidate another asset within your portfolio to retire the short-term debt.
Ensure your exit strategy accounts for current Alberta market dynamics, such as seasonal buyer demand and standard legal processing timelines under the Law Society of Alberta.
Step 4: Assemble Your Deal Package
Speed is the primary advantage of private capital. You can accelerate your approval timeline by bringing a complete deal package to your lender from day one.
The Investor Checklist:
Purchase and Sale Agreement: Executed contract with clear closing dates.
Itemized Renovation Budget: Detailed line items, contractor quotes, and project timelines.
Comparable Market Analysis (CMA): Recent local sales supporting your target ARV.
Exit Strategy Summary: A brief write-up explaining exactly how and when the lender will be repaid.
By mastering LTV limits, managing your draw schedules, and presenting a professional deal package, you position yourself as a low-risk, high-execution investor.
Review our complete Hard Money Playbook to see how we structure fast, flexible capital solutions for Alberta investors.
Do you have a deal that you would like us to review - complete our 1-page Pitch Deck here
