The Quick Read: Hard money and private money are not legally separate products, so the real choice is between a lending business that works from a set checklist and an individual or small group that lends on negotiated terms, with the best fit for a first-timer depending on the deal, the paperwork, and the relationship. The labels describe who is lending, not which rules apply. Judge a lender by its documents and its draw process, not its name.
- Hard money is usually a lending company that reviews the property, the rehab plan, and your exit, not the property’s rental income.
- Private money is usually a person or small group, and the relationship often shapes the terms.
- Both want your own cash in the deal, and neither one removes that need.
- Hard money fits an investor who wants a defined process. Private money fits one who has a trusted lender and a clear written agreement.
- Sloppy paperwork on either side can cause trouble at sale or refinance.
The Honest Answer in One Paragraph
Pick hard money if you have no private lender in your circle, want a structured draw schedule, and are comfortable handing over a full deal package. Pick private money if you already have someone who trusts you, you want terms shaped to your project, and you will put everything in writing. Many first-time flippers end up using both on one deal. Neither is easier on the borrower. They are just different kinds of homework.
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.
Side-by-Side
The hard money column reflects the structure of programs Lendmire’s wholesale network places, and parameters vary by lender, property, and experience. The private money column shows published industry norms, which vary widely by lender. Pricing is left out on purpose. It lives in the calculator, not in a comparison like this.
| Factor | Hard Money Flip Loan | Private Money (industry norms) |
|---|---|---|
| Who lends | A lending business | Often an individual or small group |
| Review basis | Property, rehab plan, exit | Property plus borrower and relationship |
| Documentation | Full deal package | Anywhere from light to formal |
| Property types | 1-4 unit non-owner-occupied | Set by the lender’s comfort |
| Entity vesting | Commonly an LLC | Entity or individual, by agreement |
| Timeline | Follows the lender’s checklist | Depends on the parties |
| Rehab funding | Formal draws against work | Whatever the note says |
| Reserves and cash | Your own cash in the deal | Your own cash in the deal |
Loans to an LLC are common on the hard money side, subject to lender program eligibility. Always confirm vesting before you sign a purchase contract.
Key Terms Defined
Hard money loan: a short-term, business-purpose loan secured by the property, underwritten mainly on the property’s value, the rehab plan, and your exit.
Private money loan: a loan from an individual or small group, often someone who knows you, on terms the two sides negotiate.
Loan-to-cost: the loan amount measured against the total project cost, meaning purchase plus rehab, rather than against the property’s value alone.
After-repair value (ARV): what the property is expected to be worth once the work is done.
Draw: a release of rehab money after a portion of the work is finished, usually after an inspection.
Exit strategy: how the loan gets repaid. On a flip, that means a sale. On a hold, it means refinancing into long-term financing.
When Hard Money Is the Better Fit
Hard money fits a first-timer who wants a defined process and does not have a private lender in their circle. The lender is a business. It has a checklist, a draw schedule, and a way of handling extensions. You trade some flexibility for predictability.
Here is what the structure looks like across select lenders in Lendmire’s network. Every figure below varies by lender, property, and experience, and none is a commitment to lend.
- Leverage is tied to your track record. Fix-and-flip loans typically reach 85% of project cost with fewer than two completed projects, 90% of project cost at two or more, and 93% of project cost at five or more. Every tier is capped at 75% of ARV. The top tier is reserved for experienced investors.
- The lower of the two tests wins. If the ARV is thin, the 75% cap binds before the cost-based percentage does.
- Rehab money comes in draws. Up to 100% of the rehab budget can fund in draws against completed work. That is a rehab-budget figure, not a purchase loan-to-value.
- There is no true 100% purchase program. If you see 100% advertised, read the fine print. It usually means the rehab portion, funded as work gets done.
- Bridge purchases without rehab typically go up to 80% of the purchase price, and cash-out or rate-and-term refinances up to 65% of value.
- Terms run 6 to 18 months, interest-only, with no prepayment penalty. There are no multi-year options on the current program.
- Credit starts at a 620 minimum score, with additional conditions below 660. First-time investors qualify at the lower leverage tiers. Underwriting stays asset-based, meaning property, plan, and exit.
- Property and size: non-owner-occupied residential, 1 to 4 units, with loans up to $5,000,000 and larger by exception. Ground-up construction runs to 10 units. Commercial, industrial, land, hospitality, and owner-occupied properties are not offered.
Take a first-timer buying a tired duplex. They have no completed projects, so the lower tier applies. The lender looks at the contract, the scope of work, contractor bids, and the ARV, then sizes the loan to the lower of the two tests. The investor brings the rest in cash. That is not a flaw in the product. It is the product.
Documents are where first-timers stumble. One non-lender comparison from Goliath Data lists the typical hard money package: the purchase contract, rehab budget, scope of work, contractor bids, appraisal, title insurance, entity documents, a personal guarantee, bank statements, and an exit plan. The page treats this as a qualitative picture, and so should you. Lenders differ on what they ask for.
Hard money also suits you if you want the draw process to act as a guardrail. Money released against finished work forces the schedule to match reality. Some first-timers find that annoying. Others find it keeps a budget honest.
When Private Money Is the Better Fit
Private money fits a first-timer who already has a lender who trusts them and wants terms shaped to one project. Because the lender is often a person, the conversation is closer to a business partnership than an application. That can help. It can also hurt.
A private lender often weighs the borrower as well as the property. A hard money lender leans harder on the collateral. With no completed flips behind you, relationship strength may carry weight a spreadsheet cannot.
Private money shines in three situations:
- You have a trusted lender and a strong deal package. A one-page summary, a clear budget, and a realistic exit may be all a friendly lender needs. Goliath Data notes that private lenders may ask for little more than a call, a summary, and a note. Skip the formality and you risk a mess when the deal goes wrong.
- You need terms a standard checklist will not give you. Extension rights, draw timing, and payoff mechanics can be written around your project.
- You are filling a cash gap. A first-timer short on cash for their share may bring in a private lender behind a primary loan, if the senior lender permits it. Many lenders restrict additional liens or borrowed down payments, so ask before you sign anything.
Flexibility cuts both ways. A private lender can be more flexible than a large hard money company, and flexible does not mean cheaper or easier. Terms live wherever the note puts them.
The weak spot is paperwork. Informal private loans fail when nothing is in writing. Get a signed promissory note, a recorded security instrument, a clear payoff process, and written extension and default terms. Keep clean records, because a later refinance requires a clean lien history.
Do the Labels Actually Mean Anything?
Less than you would hope. Some firms call themselves private lenders to sound flexible. Some private lenders run formal programs. Judge the lender by what is in the term sheet.
Both loan types are business-purpose loans. That matters in one practical way. Under the federal consumer-credit rule, Regulation Z’s business-purpose exemption removes credit extended primarily for a business purpose from its scope. Credit extended to an entity rather than a natural person is exempt too, and the CFPB’s text frames these as separate tests. A creditor decides case by case whether the primary purpose is business. That is one more reason to keep a flip loan clearly business-purpose, not mixed with personal use.
Exempt does not mean unregulated. Geraci LLP explains that numerous other federal consumer laws still apply to business-purpose loans. State licensing rules can also reach lenders, and they vary by state. A lender being an individual is not a guarantee it sits outside state law.
Two other myths deserve a quick burial. Private money is not automatically cheaper. And hard money is not automatically rigid. Terms depend on the lender, the deal, and you.
Can You Use Both on One Flip?
Yes, and plenty of first-timers do. The usual pattern is a hard money loan sized to a percentage of project cost, plus a private lender covering part of the investor’s own cash share. The sequence matters, and so does consent.
Before you stack lenders, check three things:
1. Does the primary lender allow a second lien or borrowed cash in the deal? Some do not.
2. Who gets paid first at sale, and is that written down?
3. What happens if the work runs long? Extension terms on both loans should line up.
If the plan is to hold and rent instead of sell, the bridge loan has to outlast the rehab, the lease-up, and any seasoning period the next lender requires. Many investors then refinance out of hard money into long-term rental financing once the property is stabilized, and Lendmire brokers that path. The complete DSCR loans guide explains how that long-term financing works. Clear lien history makes that refinance far easier.
Questions to Ask Either Lender
Run any lender through the same list. The answers tell you more than the label does.
- What do you underwrite: the property, the plan, me, or all three?
- What documents do you need, and which ones could hold up the process if they’re missing or late?
- How are rehab funds released, and who inspects the work?
- What happens if the project runs past the term? Can I extend, and on what conditions?
- Do you require an entity? Do you require a personal guarantee?
- What does my own cash contribution need to look like?
- Is there a prepayment penalty? (On the hard money programs described here, there is none, but confirm for any lender.)
- Can you fund my next deal, or only this one?
- What do you need on file so a later refinance goes smoothly?
This article stays out of pricing on purpose.
The Balanced Verdict
Choose hard money if you want structure, formal draws, and a business counterparty with a repeatable process. It is a good fit if your circle does not include someone who would lend, or if you want a lender who will do the next deal too. Expect to document everything and to bring real cash.
Choose private money if you have a trusted lender, a well-prepared deal package, and the discipline to paper the loan like a stranger lent it. It is a good fit if you want custom terms. It is a poor fit if the relationship is the only underwriting.
Use both when your cash falls short and your senior lender allows it.
Whichever way you go, three things decide the outcome: how realistic the ARV and budget are, how much of your own cash is in, and whether the exit works on a calendar you can defend. The lender label is the least important item on that list.
Frequently Asked Questions
Are hard money and private money the same thing?
Close, but not identical in everyday use. Both are non-institutional, business-purpose loans. Hard money usually means a lending company working from set criteria, while private money usually means an individual or small group lending on negotiated terms. The terms get mixed up in marketing, so read the term sheet.
Can a first-time investor get a hard money flip loan?
Often yes, at the lower leverage tiers, subject to lender guidelines. On the programs described here, a first-timer with fewer than two completed projects typically sees 85% of project cost, capped at 75% of ARV. A 620 minimum credit score applies, with additional conditions below 660. Everything varies by lender, property, and experience.
Is private money easier for a first-timer?
It can be, if a lender already trusts you. Without that relationship, an informal request often goes nowhere. Even when a private lender asks for little, a written note and recorded security instrument protect both sides and keep a later refinance clean.
Do I need an LLC to borrow?
Not always, though many flippers use one. Entity requirements vary by lender and by program. Lending to an entity is handled differently from lending to an individual, so confirm vesting before you go under contract.
What if my flip runs long?
Ask about extensions before you sign. Hard money programs commonly run 6 to 18 months, interest-only, and extension terms differ by lender. A private note can say whatever you and the lender agree on, which is good only if the extension and default language is written down.
Next Step
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. You can call 828-256-2183 to talk it through. Nothing here is a commitment to lend, and every file is underwritten individually.
A first flip rewards the investor who treats the exit like the start of the plan, not the end.
About Lendmire
Lendmire (NMLS# 2371349), a non-QM mortgage broker serving investors in 41 markets including Washington, D.C., helps structure DSCR scenarios commonly evaluated around a property’s rental income rather than personal income paperwork, subject to lender guidelines. A Scotsman Guide Top Mortgage Workplace in 2025 and 2026, Lendmire places loans through wholesale investor lenders and is not a direct lender.
The exit plan matters as much as the purchase price on short-term financing – see the hard money loan overview.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Goliath Data: Hard Money vs. Private Money for Flippers
2. CFPB Regulation Z §1026.3: Exempt Transactions
3. Geraci LLP: Consumer Laws That Apply to Business Purpose Loans
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Does a Hard Money Fix-and-Flip Loan Need Full Documentation? · Can a First-Time Flipper Fund Payments Inside a Hard Money Loan? · Does a Hard Money Lender Cap Loan to Cost on a Flip?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.