The Quick Read: For a first flip, the real choice is between a company that lends on real estate as its business and an individual lending their own money, and the label matters far less than the lender’s written guidelines, draw process and exit terms. Neither label has an official definition, so judge each lender by its documents. Experience usually changes how much a lender will advance, not whether you can apply.
- Hard money lenders usually run a repeatable, deal-based process. They look first at the property, the rehab plan and the exit.
- Private money often means one person or a small group lending on terms you negotiate. Capacity and appetite vary from lender to lender.
- With fewer than 2 completed projects, the network’s hard money tier funds up to 85% of project cost, capped at 75% of after-repair value. Figures vary by lender, property and experience.
- Rehab money is released in draws against finished work, whichever route you pick.
- Paperwork is the common failure point on both routes: entity documents, a line-item budget and proof of funds.
The Honest Answer: Who Each Option Is Really For
Hard money fits a first-timer who wants a defined process. The lender is usually a company with written guidelines, a draw schedule and the ability to fund later deals. Private money fits a first-timer who already has a relationship with someone who has capital and is willing to lend. The terms can bend, but the lender’s capacity and patience set the limit.
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.
The two labels blur in practice. Many smaller hard money lenders now call themselves private lenders. Some individuals lend like a business. So ask who is lending, how they underwrite, how they release rehab funds and what happens at maturity. Those answers tell you more than the name does.
Side-by-Side
The hard money column below reflects parameters across Lendmire’s wholesale network, which vary by lender, property and experience. The private money column shows published industry norms, which vary widely by individual lender. Nothing here is a commitment to lend.
| Factor | Hard Money (network parameters) | Private Money (industry norms) |
|---|---|---|
| Who lends | Company lending as a business | Individual or small group |
| Review basis | Property, plan and exit first | Property plus the relationship |
| Documentation | Contract, budget, comps, entity docs | Often negotiated case by case |
| Property types | Non-owner-occupied 1-4 units | Set by the lender’s comfort |
| Entity vesting | Varies; some programs want an entity | Individuals often accepted |
| Rehab funds | Draws against completed work | Often informal draw control |
| Reserve expectations | Liquidity for closing cash and reserves | Depends on the lender |
| Term structure | 6-18 months, interest-only | Negotiated |
| Lender capacity | Built to fund repeat deals | Limited by one person’s capital |
What a Lender Looks At When You Have No Experience
A lender with no track record to review looks at five things, in roughly this order. First, the property and its after-repair value. Second, the rehab plan and the contractor doing the work. Third, the exit strategy. Fourth, your liquidity. Fifth, your credit.
On the hard money side of the network, that last item has a floor. A 620 minimum score applies, with additional conditions below 660. First-time investors qualify at the lower leverage tiers. Underwriting stays asset-based, so the property, the plan and the exit carry the file. Credit still gets reviewed.
Here is how leverage steps up with experience. These are loan-to-cost figures, not purchase LTV, and every tier is capped at 75% of after-repair value:
- Fewer than 2 completed projects: up to 85% of project cost.
- 2 or more completed projects: up to 90% of project cost.
- 5 or more completed projects: up to 93% of project cost.
The top tier is reserved for experienced investors. Bridge purchases without rehab go up to 80% of purchase price, and up to 100% of the rehab budget funds in draws against completed work. There is no true 100% purchase program. That 100% figure applies to the rehab budget only, so you still bring cash for the gap at closing.
Private lenders weigh experience differently. Some will not lend to someone with no completed deal. Others care more about whether they trust you and the plan. A person lending their own money may also hold back for a reason a company never would, like a family decision or a retirement account that is tied up elsewhere.
When Hard Money Is the Better Fit
Hard money is the better fit when you want a process you can read before you commit. Here are the situations where it tends to win.
You do not have a private relationship with capital. Most first-timers do not. A lender that lends as a business is easier to find and compare than an individual willing to fund a stranger.
You want written guidelines. A company lender can tell you its leverage tiers, its draw steps and its document list up front. You can build the budget and the entity paperwork around that checklist.
You expect more than one deal. A company can fund your second flip. An individual with limited capital may have their money tied up in your first one.
The property is distressed or does not fit bank rules. Asset-based lenders look at the collateral and the after-repair value. Rehab funds come in draws, so the lender can see work move forward before releasing money.
You want a defined term with no prepayment penalty. Terms across the network run 6 to 18 months, interest-only, with no prepayment penalty. That works for a flip that sells. It also works for a flip that gets refinanced. There are no multi-year options on the current program, so a plan that needs longer runway needs a refinance.
The tradeoffs are real. Leverage tiers favor experience, so a beginner brings more cash than a repeat flipper. Draws mean you front some rehab costs and get reimbursed after the work is verified. The loan is short, so a stalled rehab or a slow sale puts pressure on the maturity date. Loan amounts run up to $5,000,000, with larger amounts by exception, so size is rarely the limit on a first flip.
When Private Money Is the Better Fit
Private money is the better fit when someone you trust has capital and a reason to back you. The flexibility is real in those cases, but flexibility is not the same as lower cost or lower risk.
You have a relationship. A relative, a friend or a local investor who knows your work may lend on a first deal where an institutional fund would not. That trust is the underwriting.
Your deal does not fit a standard box. An individual can agree to terms that a company program cannot, such as an unusual draw schedule or a different property type. Hard money programs in the network cover non-owner-occupied residential property with 1 to 4 units. Ground-up construction runs up to 10 units. Commercial, land and owner-occupied properties are outside those programs.
You want an individual as borrower. Some hard money programs require an entity borrower. Private lenders are more likely to accept an individual, which can simplify a first deal.
The deal is small and the lender has capacity. A single person can fund one or two projects at a time. A first flip that fits their appetite can work well.
The risks sit mostly in the paperwork. A promissory note is only a promise to pay. A recorded deed of trust or mortgage is what creates the lien on the property. Without it, the lender has weak recourse, and the borrower can end up in a dispute over who holds what. The same goes for rehab funds. Without a draw agreement and a scope of work, nobody agrees on when money is released.
Licensing is another gap. Rules for private lenders vary by state. Lenders who make loans often, or loans secured by residential property, may need a state license. Pooled funds can raise securities questions. Ask any private lender whether they are properly set up in your state, and have an attorney review the structure.
There is also no insurance on either kind of loan. If a private lender runs short of cash mid-rehab, you have a half-funded project and a contract that may not answer the question.
The Paperwork That Stalls First Flips
Document gaps cause more friction on first flips than anything else, and they apply to both lender types. The file normally needs:
1. An executed purchase contract.
2. Comparable sales or a broker price opinion supporting the after-repair value.
3. A line-item rehab budget with contractor bids. A lump sum does not work.
4. Proof of funds covering closing cash plus reserves.
5. Entity documents, if you borrow through an entity: articles, operating agreement and EIN letter.
6. A schedule of real estate owned and a written exit plan, if the lender asks.
Mismatches slow files down. If the contract names one entity, the bank account another and the application a third, someone has to correct it before closing. Do the entity setup and the budget before you go under contract, not after. That preparation helps with any lender.
Draws work the same way on both sides in principle. The borrower submits a request with photos. The lender verifies by photos, desk review or inspection, then releases funds. If a lender cannot tie each budget line to a visible stage of work, the draw schedule gets hard to run. That is why a line-item budget matters. Draw control is usually a set process with a company lender and often informal with an individual.
Entity, Guarantees and the Business-Purpose Frame
Both loan types are normally business-purpose loans on non-owner-occupied property. Because of that, the federal consumer lending rules generally do not apply the way they do to a standard owner-occupied mortgage. The Federal Reserve’s supervisory manual on Truth in Lending lists two exemptions: credit extended primarily for a business purpose, and credit extended to someone other than a natural person.
That does not mean the paperwork can be casual. The OCC’s Truth in Lending handbook cautions that a checked box saying the loan is for business, with nothing documenting the intended use, may be insufficient evidence. A Hunton Andrews Kurth paper on business-purpose loans says lenders face stiff penalties for wrongly treating a loan as exempt. For you, that means lenders will ask for a clear statement of purpose, and a flip on a house you plan to live in is a different situation altogether.
An LLC can hold title and borrow, but it does not replace you. The lender still reviews the person behind the entity, and personal guarantees are common on both hard money and private money loans. An entity limits some exposures. It does not remove a guarantee you signed.
Where This Connects to Long-Term Rental Financing
Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path. The refinance is reviewed on the property’s rental income rather than your personal income documents, subject to lender guidelines. Match the short-term loan’s maturity to the time you need to finish the rehab, lease the property and refinance. Lendmire’s complete DSCR loans guide covers how that second loan is reviewed.
Key Terms Defined
After-repair value (ARV): The estimated value of the property once the rehab is finished, based on comparable sales.
Loan-to-cost: The loan amount as a share of the purchase price plus the rehab budget.
Draw: A release of rehab funds after the lender verifies completed work.
Deed of trust or mortgage: The recorded document that gives the lender a lien on the property. A note alone does not.
Personal guaranty: A signed promise by an individual to repay if the borrowing entity does not.
Exit strategy: The plan to repay the short-term loan, usually by selling or by refinancing into long-term debt.
A Balanced Verdict
Pick hard money if you have no private lender in your life, want a written process, and expect to do more than one deal. Expect to bring more cash as a beginner, since the leverage tiers reward completed projects. Pick private money if a trusted person has capital and will put the terms on paper, with a recorded security instrument and a draw agreement. In that case the flexibility is worth having, and the relationship is part of the risk.
Many first-timers do best by comparing both on documents and process instead of on the label. Run each option through the same four questions. Who is lending? How are rehab funds released? What happens at maturity? What is the exit? Tax treatment varies by how funds are used and how the property is held, so keep clear records and consult a qualified tax professional.
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. Program terms vary by lender, property and experience, and nothing here is a commitment to lend.
Frequently Asked Questions
Are hard money and private money the same thing?
Not always, but the labels overlap. Neither has an official definition. The common split is that a hard money lender lends on real estate as a business, while a private lender is an individual lending their own money. Many smaller hard money lenders now call themselves private lenders, so judge by documents and process.
Can I get either one with no flipping experience?
Usually yes on the hard money side, at lower leverage. In the network, fewer than 2 completed projects means up to 85% of project cost, capped at 75% of after-repair value, with a 620 minimum score and added conditions below 660. Private lenders decide individually, and some will not lend to a first-timer. Terms vary by lender, property and experience.
Is a loan from a friend or relative private money?
Yes, that is the most common picture of it. Put it in writing with a promissory note and a recorded deed of trust or mortgage. Without the recorded instrument, the note is not secured by the property.
Does hard money ignore my credit and finances?
No. The property and the plan come first, but lenders still look at credit and liquidity. A 620 minimum score applies in the network, and you need proof of funds that covers closing cash plus reserves.
What happens if my flip runs past the loan term?
Terms on the network’s hard money run 6 to 18 months, and there are no multi-year options, so a late sale puts pressure on the maturity date. Many investors plan a refinance into long-term DSCR financing as the exit. A private lender may agree to an extension, but get that in writing before you need it.
For a closer look at how the two lender types compare on a first deal, see Lendmire’s piece Hard Money Flip Loan vs Private Money for a First-Time Investor.
About Lendmire
Lendmire, NMLS# 2371349, is a non-QM mortgage broker serving real estate investors in 41 markets, including Washington, D.C., through DSCR investor loan programs. Qualification is generally reviewed around the subject property’s rental income, not the borrower’s W-2 history — a practical fit for LLC-titled portfolios and self-employed investors. All scenarios remain subject to lender review and program guidelines. Two consecutive Scotsman Guide Top Mortgage Workplace recognitions (2025, 2026).
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References
1. Federal Reserve – Regulation Z supervisory manual
2. OCC – Comptroller’s Handbook, Truth in Lending Act
3. Hunton Andrews Kurth – 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: National vs Local Hard Money Lender for a Fix-and-Flip Investor · How to Replace Seller Financing With a Hard Money Loan on a First Flip · 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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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.