The Quick Read: Hard money is a short, interest-only bridge sized on the property, the rehab plan, and your exit, and for a rental investor the main alternatives are a DSCR loan, private money, seller financing, and a local bank portfolio loan. Qualifying turns on equity in the deal, a credit score that clears the lender’s floor, and a believable plan to pay the loan off. Which tool fits depends on the property’s condition today: a rental that needs work points to a bridge, while a rental that is finished and leased points to long-term financing.
- Requirements: Hard money is asset-based, but lenders still check credit, experience, and your plan. A 620 score is the typical minimum, with extra conditions below 660.
- Leverage: Lenders size most hard money loans against project cost and cap them against after-repair value. Terms vary by lender, property, and experience.
- Alternatives: DSCR financing, private money, seller financing, a portfolio loan, an extension, or a sale.
- The catch: A bridge only works if you can take it out. The refinance depends on appraised value, market rent, and credit.
What Hard Money Actually Is (and Isn’t)
Hard money is a business-purpose loan secured by a property. The lender cares most about the collateral, meaning the property and what it will be worth after the work. That is why people call it asset-based lending.
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 loan is short. Across the programs Lendmire places, terms run 6 to 18 months, interest-only, with no prepayment penalty. Interest-only means you pay the cost of borrowing each month and the whole balance comes due at maturity. You repay it by selling or by refinancing into a long-term loan.
Hard money is not a loan with no underwriting. The lender still reviews your credit, your track record, the budget, and your exit. It simply weighs the deal more heavily than your personal income.
It also is not for owner-occupied homes. These loans are for non-owner-occupied residential property of one to four units, plus ground-up construction up to ten units. Commercial, industrial, land, and hospitality properties are not offered. Programs run across 41 markets, including Washington, D.C., through select lenders in the network, and availability varies by lender and location.
Here is how the two main tools compare for a rental.
| Factor | Hard money | DSCR loan |
|---|---|---|
| Purpose | Buy, rehab, bridge | Long-term rental hold |
| Underwritten on | Property, plan, exit | Rent vs. monthly payment |
| Term | 6-18 months, interest-only | 30-year fixed is the spine |
| Property condition | Can need work | Livable and rentable |
| Exit | Sale or refinance | Hold, or refinance later |
What Do Hard Money Lenders Require?
Hard money lenders ask for equity, a credit score above their floor, and a plan. Experience raises your leverage. The property has to be an eligible type, and the numbers have to work at the finished value.
Borrower side
Credit. The minimum score is typically 620 across the programs Lendmire works with, with additional conditions below 660. First-time investors can qualify at the lower leverage tiers. Underwriting stays asset-based, so credit is a gate rather than the main event.
Equity and leverage. This is where hard money differs most from a standard loan. Lenders size the loan against cost, then cap it against value. Typical ceilings, which vary by lender, property, and experience, look like this:
- Fix-and-flip: 85% of project cost with fewer than 2 completed projects, 90% at 2 or more, and 93% at 5 or more. Every tier is capped at 75% of after-repair value, so the lower of the two tests governs.
- Bridge purchase without rehab: up to 80% of the purchase price.
- Rate-and-term or cash-out refinance: up to 65% of value.
- Rehab budget: up to 100% of the budget can fund in draws against completed work. That is a share of the rehab budget, not a purchase loan-to-value figure.
Notice the phrasing. These are loan-to-cost figures, meaning the loan as a share of what the project costs you. There is no true 100% purchase program. When you see 100% financing advertised, it usually means the rehab budget is funded in draws while you still bring cash for the purchase.
Experience. The top tier is reserved for investors with a documented track record of completed projects. Newer investors usually get lower leverage. Borrowing less than the maximum can make the file easier to place.
Entity. Many investors borrow through an LLC. Loans to LLC-titled borrowers are available subject to lender program eligibility, and the lender will ask for the entity documents.
Property side
Hard money lenders look at the property as hard as they look at you.
- Type: non-owner-occupied residential, one to four units. Ground-up construction can go to ten units.
- Condition and scope: a clear scope of work and budget, since funds release in draws as work is completed.
- Value: an appraisal or valuation that supports the after-repair value (ARV), meaning what the property should be worth once the work is done.
- Size: loans go up to $5,000,000, and larger by exception. Smaller balances vary by lender.
What to have ready
- Government ID, entity documents, and an operating agreement if you borrow through an LLC.
- A scope of work and rehab budget, with contractor bids.
- A purchase contract or the current payoff statement.
- Proof of cash for the down payment and closing costs.
- A résumé of past projects, if you are claiming a leverage tier that needs them.
- A written exit plan: sell, or refinance into long-term financing.
One short note on how these loans are treated. Hard money is a business-purpose investor loan, so it is reviewed differently from a standard owner-occupied mortgage. Lenders still document that purpose. The OCC’s Truth in Lending handbook warns that a checked business-purpose box, with nothing showing how the proceeds will be used, may not be enough evidence. A Hunton law-firm paper adds that business purpose does not mean exempt from every rule. The practical takeaway is to keep your paperwork consistent with the investment purpose of the loan.
When Hard Money Fits a Rental, and When It Doesn’t
Hard money fits when the property cannot qualify for long-term financing yet. It fails when you are using a short loan to carry a long hold.
It fits when:
- The property needs work before a tenant can move in.
- You need to buy before a long-term lender could review the file.
- The numbers work at the finished value, and you have an exit.
It doesn’t fit when:
- The property is already leased and stable. A bridge there only adds a second closing.
- You have no plan for the maturity date.
- You are buying a home to live in. These loans are business-purpose only.
Lendmire’s piece Hard Money Bridge vs DSCR Loan for an Investor Stabilizing a Rental goes deeper on that dividing line. The short version is that a gut rehab does not fit a DSCR loan, and a stabilized rental does not need a bridge.
Alternatives at a Glance
For a rental investor, six alternatives are worth a look, and each answers a different problem. This table puts them side by side.
| Option | Best for | Main trade-off |
|---|---|---|
| DSCR loan | Finished, rentable property | Not for gut rehabs |
| Private money | Investors with personal lender ties | Terms are by agreement |
| Seller financing | Sellers who own free and clear | Needs a willing seller |
| Bank portfolio loan | Several properties, local relationship | Needs equity and documentation |
| Conventional investment loan | Strong personal income | Income and debt-ratio review |
| Extension or sale | Buying time or exiting | Costs money or ends the hold |
DSCR loans
DSCR stands for debt service coverage ratio. It compares the property’s monthly rent with its full monthly payment, meaning principal, interest, taxes, insurance, and any HOA dues (PITIA). A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. It is the natural exit from a bridge. The Muñoz Ghezlan business-lending blog notes that DSCR refinances generally need less seasoning than conventional ones and that the model has no cap on the number of financed properties. That is why it suits investors who are scaling.
Here is what DSCR looks like across the lender network Lendmire works with, as typical ranges rather than promises:
- Coverage: 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Stronger ratios open better pricing and leverage.
- Purchase leverage: most files land at 75% to 80% LTV on an investment-property purchase. Select high-leverage programs reach 85% LTV with roughly a 700-plus score.
- Cash-out refinance: tops out around 75% LTV on an investment property across most of the network.
- Credit: a 620 floor exists in parts of the network. Most programs want around 660, and 700 or more unlocks the strongest tiers.
- Loan size: up to $3,000,000 on standard programs, with smaller balances available through select lenders. Above $2,500,000 the network generally holds to 30-year fixed structures.
- Reserves: commonly around 6 months of PITIA. Conservative rate-and-term files at modest leverage under $1,500,000 can see reserves waived, and larger loans typically step up to about 9 months.
- Structures: 30-year fixed is the spine. Select lenders offer 40-year terms and interest-only periods, and ARM structures exist.
LTV is the loan amount divided by the property’s value. Reserves are cash you hold after closing. Lendmire’s complete DSCR loans guide covers each of these in detail.
Two warnings from daily file work. First, clearing 1.00 is not positive cash flow. Repairs, vacancy, management, utilities, and capex sit outside the calculation. Second, a bigger down payment lowers the payment and can lift the ratio, but it never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
DSCR loans are not offered on manufactured homes, log homes, or barndominiums.
Private money
Private money comes from individuals: a relative, a friend, or a business contact. Terms are set by agreement, which is both the appeal and the risk. You can get flexibility a lender will not give you, but a handshake deal with thin paperwork tends to go wrong. Put everything in writing, secure the loan with a recorded lien, and make sure the maturity date has a plan behind it.
Seller financing
Here the seller carries a note instead of taking all cash. It works best with sellers who own the property free and clear and care more about steady income than a lump sum. The deal is whatever the two of you negotiate, so the price and the terms can move together. The weak spot is the maturity date, which can arrive before you can refinance.
Bank portfolio loans
A local bank keeps a portfolio loan on its own books, so it can set its own rules. Investors use it to refinance several properties into one loan, as long as there is equity and cash flow behind the package. Expect a hands-on review of you and your properties. It rewards relationships.
Conventional investment loans
These run on your personal income, debt-to-income ratio, and traditional personal-income documentation. They suit investors with strong W-2 or business income and only a few financed properties. The paperwork load is heavy, and each financed property counts against you.
Extension or sale
Sometimes the right move is not a new loan. Ask the current lender for an extension if you need months rather than years. Extensions cost money, but they can beat a rushed refinance. If the numbers no longer work, selling is a legitimate exit and sometimes the smartest one.
How to Choose: Match the Tool to the Property
Start with the property’s condition today, then work backward from your exit. The decision rule is simple: match the tool to the stage of the property, then plan the exit before the first closing.
- The property needs real work. Use a bridge for the purchase and the rehab. Plan the long-term refinance before you sign.
- The property is livable and leased. Skip the bridge. A DSCR purchase or refinance is usually the cleaner path.
- You own equity in other rentals. A DSCR cash-out refinance on a stabilized property may fund the next purchase. Lendmire’s page on cash-out refinance on an investment property covers the mechanics.
- You have thin documentation or lots of properties. DSCR lender review on property-level rent, or a bank portfolio loan, usually fits better than a conventional loan.
What If the Maturity Date Is Close?
A bridge that is close to maturity is a time problem. Triage by how much runway is left.
- Plenty of runway. Confirm the property is rented and that the rent supports a DSCR refinance. Order the appraisal with a market-rent analysis in mind.
- Not much runway, and the seasoning clock is still running. Seasoning is the waiting period a lender wants between purchase and refinance. Cash-out refinances commonly expect about 6 months of ownership. Ask the bridge lender about an extension before the deadline, not after.
- Maturity arrives before seasoning ends. Your options are an extension, a sale, a refinance with outside cash, or another bridge.
- The appraisal comes in low. A bridge sized near its maximum leaves no cushion. If the new loan cannot pay off the old balance, you need cash to cover the gap, a partner, or a sale.
A word on the delayed-financing exception. It is generally built for cash purchases. A hard money loan is normally a lien on the same property, so the exception usually does not apply. Plan for a seasoning wait or a payoff-only refinance instead.
A Worked Example: One Rental, Two Financing Paths
Run this as a modeled scenario, with no dollar figures, only percentages and ratios. Say you buy a two-unit rental that needs a moderate rehab, and you have completed fewer than two projects.
Path one: bridge, then DSCR refinance. The hard money loan covers up to 85% of project cost at your experience level, capped at 75% of after-repair value, and rehab funds release in draws. You bring the rest in cash. Once the units are leased and the work is finished, you apply for a DSCR cash-out or payoff refinance on the finished property. Lenders in the network generally cap a cash-out refinance on an investment property at about 75% LTV. The test is whether 75% of the appraised value covers the bridge payoff, and whether rent covers the new payment at a ratio of roughly 1.2x or better.
In this example, the bridge is sized at the 75% ARV cap, so the refinance leaves almost no room. If the appraisal lands below your projected value, the new loan may not pay off the bridge, and you would need to bring cash or sell. A smaller bridge, closer to 70% of ARV, leaves a cushion.
Path two: seller financing, then DSCR. The seller carries a note with a maturity longer than a bridge’s term. You rehab on your own cash, lease the units, and refinance. This route gives you more time, but it depends on a seller willing to carry the note, and the cash you put in is yours to risk.
Neither path is better in every case. The first gives you more leverage on the project. The second gives you more time. What both share is that the exit is planned before the first closing.
Common Mistakes
- Treating the bridge as the plan. The loan is a tool. The plan is what happens at maturity.
- Sizing to the maximum. Borrowing the full amount leaves no cushion for a low appraisal or a delay.
- Forgetting the costs besides interest. Lender fees at closing, draw and inspection fees, and extension fees add to the cost of the loan, so compare the full cost of the exit.
- Applying DSCR logic to a gut rehab. A DSCR lender wants a livable, rentable property.
- Equating a DSCR above 1.00 with profit. The ratio ignores repairs, vacancy, and management.
- Ignoring the paperwork. Keep entity documents, the budget, and the business-purpose paperwork clean from day one.
One more practitioner note. On files like these, the stronger deals are the ones where the investor talks to a DSCR lender before buying the property, not after the rehab. The DSCR program sets the target: the appraised value, the market rent, and the credit score the property has to support. Working backward from that target is usually cheaper than discovering the gap at the refinance. When a file does get close to a DSCR refinance, Lendmire brokers that path, and many investors use it to refinance out of hard money once the property is stabilized.
Key Terms Defined
After-repair value (ARV): What the property should be worth once renovations are finished.
Asset-based lending: Lending that looks mainly at the collateral, not your personal income.
Draws: Installments of rehab money released as completed work is inspected.
Interest-only: A loan structure where you pay interest each month and the full balance is due at maturity.
Loan-to-cost: The loan amount divided by what the project costs you, including the rehab budget.
LTV (loan-to-value): The loan amount divided by the property’s appraised value.
PITIA: Principal, interest, taxes, insurance, and any HOA dues in the monthly payment.
Reserves: Liquid cash you hold after closing, usually counted in months of PITIA.
Seasoning: The waiting period a lender wants between buying a property and refinancing it.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Frequently Asked Questions
What credit score do I need for a hard money loan on a rental?
A 620 score is the typical minimum across the programs Lendmire places, with additional conditions below 660. Because underwriting is asset-based, the property, the plan, and the exit carry as much weight as the score. Requirements vary by lender, property, and experience.
How much equity do I need for hard money?
It depends on the transaction and your experience. Fix-and-flip loans run 85% of project cost with fewer than 2 completed projects, 90% at 2 or more, and 93% at 5 or more, all capped at 75% of after-repair value. Bridge purchases without rehab go up to 80% of the purchase price, and refinances up to 65% of value. All of this varies by lender, property, and experience.
What is the best alternative to hard money for a rental?
For a finished, rentable property, a DSCR loan is usually the best fit. It qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. For a property that needs work, private money or seller financing can replace a bridge, though terms are negotiated and the exit still has to be planned.
Can I refinance out of hard money right away?
Not always. Seasoning, appraised value, and market rent decide whether the exit works. If the bridge matures first, the options are an extension, a sale, a refinance with outside cash, or another bridge.
Does a DSCR loan cover rehab costs?
No. DSCR lenders want a property that is livable and rentable at closing. A rehab or gut project belongs in the hard money phase first. Once the property is finished and leased, a DSCR loan can take over, subject to lender guidelines and underwriting.
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. Reach the team at 828-256-2183 or request a quote.
About Lendmire
Lendmire is a DSCR-focused mortgage brokerage, NMLS# 2371349, placing investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed by the lender around a property’s rental income rather than personal income documentation, which fits LLC-held rentals, self-employed investors, and portfolios scaling past conventional financed-property limits. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. OCC – Truth in Lending Act handbook
2. Hunton Andrews Kurth – Business Purpose paper
3. Muñoz Ghezlan – Hard money alternatives and DSCR
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Should You Use Hard Money for a Rental Then Refinance to DSCR? · Can You Get Hard Money Out of State as a Remote Investor? · Can You Have More Than One Fix and Flip Hard Money Loan at Once?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.