The Quick Read: Hard money and private money are not two legal product classes, so the real choice is between a professional, asset-focused lender with set guidelines and a relationship-based lender whose terms you negotiate one deal at a time, and each fits a different flipper. Hard money tends to suit investors who want a defined process and a structured rehab draw schedule. Private money tends to suit investors who have a trusted capital source and want flexibility, if they will insist on proper paperwork.
- The labels describe who the lender is and how formally it works. They do not describe a regulated product type.
- Hard money usually comes from a business that lends against the property, the rehab plan, and the exit. Private money usually comes from an individual or small group lending on trust plus the deal.
- Both usually need cash from you at closing, and rehab money usually arrives in draws.
- Private loans can be thin on paperwork. Insist on a note, a recorded security instrument, and title insurance.
- If you plan to keep the property, the flip loan is only half the plan. The exit matters just as much.
Side-by-Side
The table below puts the two side by side on structure, not price. The hard money column reflects network program guidelines, which vary by lender, property, and experience. The private money column shows published industry norms, which vary even more because each deal is negotiated.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
| Factor | Hard Money (network programs) | Private Money (industry norms) |
|---|---|---|
| Who lends | A business or fund | Often an individual or small group |
| Review basis | Property, plan, exit; 620 minimum score | Trust, deal quality, negotiated terms |
| Documentation | Rehab budget, entity papers, proof of funds | Can range from thorough to thin |
| Property types | Non-owner-occupied 1-4 units; ground-up to 10 | Whatever the two parties agree on |
| Entity vesting | Commonly an LLC with a personal guarantee | Varies; often negotiated case by case |
| Term, described qualitatively | Short, interest-only, 6-18 months | Often short; can run longer |
| Reserve expectations | Set by the lender, file by file | Set by the lender’s comfort level |
| Rehab money | Draws against completed work | Whatever the note says |
What the Labels Actually Mean
Neither term is a legal category. You will not find either one defined in the rules that govern lending. They are practitioner vocabulary, and practitioners disagree about where the line sits.
The most common split looks like this. A hard money lender lends on real estate as a business. It is usually a company or fund that raises money specifically to make these loans. A private money lender is usually a person for whom lending is not the main job. That might be a friend, a relative, a business contact, or someone with idle capital.
The line blurs in practice. Some hard money shops describe themselves as private to sound more flexible. Hard money lenders also raise their own capital from private individuals, so the private money in a deal can sit behind the hard money shop. A loan can fit both labels at once.
So do not use the label as a shortcut. Ask who the lender is, what they underwrite, how draws work, and what the loan documents say. Those answers tell you more than the name does.
How Each Lender Underwrites
Hard money looks at the asset first. Across the programs in Lendmire’s wholesale network, the review centers on the property, the rehab plan, and how you will exit. Credit still matters. A 620 minimum score is common, with additional conditions below 660. But the file is built around the deal, not your traditional personal-income documentation.
Experience also matters. In network programs, leverage on a fix-and-flip is tiered by documented completed projects. Investors with five or more completed projects can reach 93% of project cost. Two or more can reach 90% of project cost. Fewer than two typically lands at 85% of project cost. Every tier is capped at 75% of after-repair value, and first-time investors qualify at the lower tiers. These figures vary by lender, property, and experience, and nothing here is a commitment to lend.
Private money underwrites the person as much as the property. A friend or relative may care more about your track record and your plan than about an appraisal. That can help a first-time flipper with a strong relationship. It can also hurt, because trust-based lending is only as good as the trust.
One more point on documentation. Hard money lenders usually ask for a rehab scope and budget, proof of funds, and, if you borrow through an LLC, the entity papers. Private lenders may ask for less or more. The danger is not too much paperwork. It is too little.
How Rehab Draws Work
Rehab money rarely arrives at closing. On network programs, up to 100% of the rehab budget can fund in draws against completed work. That figure is a rehab-budget number, never a purchase loan-to-value. You finish a phase, the work is verified, and the lender releases the money.
The practical effect is that you need working capital beyond your cash at closing. You often fund each phase first and get reimbursed after.
Private money draws are whatever the note says. Some private lenders run a tight draw process. Others hand over a lump sum. Either way, put the draw terms in writing before closing. A stalled draw on a half-finished kitchen can sink a flip faster than a bad comp.
When Hard Money Is the Better Fit
Hard money tends to fit when you want a defined process and have no personal capital source to lean on. It also fits a flipper who is scaling.
- Repeat flippers. If you have two or more completed projects, the leverage tiers start working in your favor. At five or more, the top tier is reserved for experienced investors.
- Investors without a capital network. If you do not have a friend, relative, or colleague with money to lend, a professional lender is the practical door.
- Ground-up or larger projects. Network programs reach ground-up construction up to 10 units, and loan sizes run up to $5,000,000, larger by exception. A private lender’s pocketbook usually has a lower ceiling.
- Investors who want a consistent draw process. Standard criteria mean fewer surprises about what the lender needs and when.
- Flips that may become rentals. A short interest-only loan with no prepayment penalty gives you room to sell or refinance. Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, a path Lendmire brokers. The complete DSCR loans guide explains how that long-term loan is reviewed.
The flip side is rigidity. Standard criteria are a feature when you fit them and a wall when you don’t. If your project is unusual, a trust-based lender may be able to bend where a professional lender cannot.
When Private Money Is the Better Fit
Private money tends to fit when you have a real relationship with someone who has capital and the deal does not match a standard program.
- Investors with a strong personal network. A lender who knows you can say yes to a plan that a guideline sheet would flag.
- Unusual deals. A property type, borrower profile, or timeline that falls outside a standard program may still work with the right individual.
- Partial funding. Some investors use private capital to cover cash to close or a gap, alongside a professional loan. Whether a lender allows other capital beside or behind its loan depends on that lender’s guidelines. Ask early.
- Longer runway. Private notes can run longer than a typical hard money term. Network hard money terms are 6-18 months, interest-only, and there are no multi-year options on the current program. If your plan genuinely needs more time, a private note can offer it. Another route is refinancing into long-term rental financing.
Flexibility has a catch. It is not automatically cheaper, and it is not automatically safer. A flexible private lender can also be inexperienced, emotional when the schedule slips, or unclear on legal protections. The relationship that wins you the loan can strain when a flip runs late.
What a Private Lender Should Put in Writing
If you borrow privately, treat the paperwork as non-negotiable. A handshake loan on a flip is a risk for both sides. Before closing, make sure the file has:
- A signed promissory note with the amount, term, and repayment terms.
- A security instrument, such as a deed of trust or mortgage, that is actually recorded.
- A lender’s title insurance policy.
- Clear default and extension terms, so a late sale does not become a surprise.
- Written draw terms covering how rehab money is released and what happens if a draw stalls.
- Clarity on who holds title, you or your LLC, and whether a personal guarantee applies.
Some private lenders skip pieces of this list. Do not let that become your problem. A defective private loan can leave the borrower with a clouded title and a lender who cannot enforce anything.
Business Purpose, Entities, and Compliance
Flip loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. The CFPB’s Truth in Lending exam manual describes an exemption for credit extended primarily for business purposes, and for credit extended to someone other than a natural person. Law-firm commentary from Doss Law notes that credit to buy or improve non-owner-occupied rental property is generally treated as business purpose.
Business purpose does not mean no rules. A Hunton law-firm analysis warns that lenders face real penalties for wrongly treating a loan as exempt. State licensing and usury rules still apply to hard and private lenders alike, and they vary by state. In practice, that means you should read the purpose statement, the entity documents, and the loan agreement. Do not assume the label protects you.
What Happens When a Flip Runs Long
A flip can run long. A budget overrun, a contractor who disappears, or a softening market can each push the schedule out. How each lender behaves in that moment is worth asking before you sign.
Professional lenders usually have written extension and default terms. That is predictable, and sometimes unforgiving. Private lenders may be more willing to work through a problem, or they may panic. It depends on the person.
Under network hard money programs, the term runs 6-18 months with interest-only payments and no prepayment penalty. That gives you room to sell early without a penalty. Still, a plan that needs the full term to work leaves no cushion. Build the schedule with slack.
If a flip turns into a hold, the question becomes sell or refinance. Lendmire’s piece Selling a Duplex Flip vs DSCR Refinance After Hard Money works through that choice.
Key Terms Defined
Hard money loan: A short-term loan from a professional lender, secured by real estate and underwritten mainly on the property, the rehab plan, and the exit.
Private money loan: A loan from an individual or small group, usually based on a relationship and negotiated terms.
Loan-to-cost: The loan amount as a share of the total project cost, meaning purchase plus rehab, rather than a share of the property’s value.
After-repair value (ARV): The estimated value of the property once the rehab is finished.
Draw: A release of rehab funds after a phase of work is completed and verified.
Personal guarantee: A promise by the owner to repay the loan personally if an entity borrower does not.
A Quick Decision Guide
Which fits depends on the investor and the deal. Use these as starting points, not rules.
- First flip, no capital network: hard money, at the lower leverage tiers, with a realistic budget and cash reserve.
- First flip, strong relationship with a lender: private money can work if the documents are complete. Many first-timers still prefer a professional lender’s process.
- Repeat flipper with documented projects: hard money’s tiered leverage was built for this profile.
- Unusual property or borrower profile: try private money, or ask a broker whether a select lender in the network will review it.
- Plan to keep the property: think about the exit first. The flip loan should leave a clear path to long-term financing.
The Verdict
Neither option wins on its own. Hard money is the stronger fit for investors who want structure, repeatable draws, and leverage that rewards experience. Private money is the stronger fit for investors with a trusted lender and a deal that needs flexibility, as long as the paperwork is complete.
The question to ask is not which label sounds better. Ask who is lending, what they underwrite, how draws work, and what your exit looks like if the schedule slips.
If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. Lendmire is a broker arranging financing through select lenders in its wholesale network across 41 markets, including Washington, D.C.
Frequently Asked Questions
Is private money cheaper than hard money?
Not always. Price depends on the lender, the deal, and what you give up beyond the headline terms. A flexible private lender may charge more for that flexibility, or ask for equity or other concessions. Compare total cost in writing, including fees and extension terms, and use the calculator for an illustrative estimate.
Can I use hard money and private money on the same flip?
Sometimes. Investors layer private capital for cash to close or a gap alongside a professional loan. Whether another source can sit beside or behind the main loan depends on the lender’s guidelines. Ask before you sign, not after.
Should a first-time flipper use private money?
It depends on the relationship and the documents. Private money can work if the lender knows you and the note, security instrument, and title policy are in place. Hard money programs also accept first-time investors at the lower leverage tiers, with underwriting built around the property, plan, and exit.
Does private money have to be secured by the property?
No. A private loan can be unsecured, but on a flip that leaves the lender with little protection. A secured, recorded loan is the safer structure for both sides.
What property types do network hard money programs cover?
Non-owner-occupied residential property with 1-4 units, plus ground-up construction up to 10 units. Commercial, industrial, land or lots, hospitality, and owner-occupied properties are not offered. Terms vary by lender, property, and experience.
About Lendmire
Lendmire (NMLS# 2371349) is a DSCR-focused mortgage broker that helps arrange investor financing across 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR eligibility is generally reviewed by the lender around the property’s rental income rather than personal income documentation, subject to lender guidelines, which works for self-employed investors, LLC operators, and portfolios above four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. CFPB Truth in Lending exam manual
2. Doss Law: Business Purpose Exemption Simplified
3. Hunton: Beware of Business Purpose
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Compare Hard Money Draw Terms Across Multiple Projects · Hard Money Flip Loan vs Private Money for a First-Time Investor · How Much a Hard Money Lender Will Lend on a Fix-and-Flip
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.