The Quick Read: The lender funds most of the project cost, and your equity partner funds the cash the lender will not. To get both to the table on closing day, settle who signs what first, document the partner’s money, and line up the paperwork so the entity, the guarantors, and the ownership chart all match.
- Two different jobs. The hard money lender finances the property. The partner covers the gap, meaning the down payment, closing costs, and any cash cushion the lender wants to see.
- Leverage is tiered by experience. Fix-and-flip loans typically run 85% of project cost with fewer than two completed projects, 90% at two or more, and 93% at five or more. Every tier is capped at 75% of after-repair value, and terms vary by lender, property, and experience.
- Everyone the lender requires must sign. Deals with partners most often stall when one partner will not sign a personal guaranty.
- Partner cash must be provable. Expect to show sourced bank statements for the partner’s funds, not just the operator’s.
- The JV agreement should match the loan clock. Terms run 6-18 months, interest-only, so the profit waterfall needs to fit that window.
Key Terms Defined
Hard money loan: a short-term, interest-only loan secured by the property, reviewed mainly on the asset, the rehab plan, and the exit.
Loan-to-cost: the loan as a share of total project cost (purchase plus rehab), not a share of today’s value.
After-repair value (ARV): what the property should be worth once the work is finished. Lenders cap leverage against it.
Holdback and draws: rehab money is held back at closing and released in draws. Each draw follows an inspection of completed work.
Guarantor: a person who personally promises to repay if the borrowing entity does not.
Seasoned funds: money that has sat in a verified account long enough for a lender to trace where it came from.
Equity partner: someone who puts in capital in exchange for a share of the profit rather than a fixed loan payment.
Waterfall: the order in which sale proceeds are paid out, usually loan payoff first, then partner capital, then the profit split.
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.
What Does the Loan Cover, and What Is Left for the Partner?
The loan covers most of the project cost, and the partner covers what remains. Hard money finances the asset. It does not finance your whole position in it.
Across the wholesale network Lendmire places files with, flip leverage is tied to documented completed projects. Fewer than two projects tops out around 85% of project cost. Two or more reach roughly 90%. Five or more reach roughly 93%. Each tier is also capped at 75% of ARV, and the lower number wins. Up to 100% of the rehab budget funds in draws against completed work. That is a rehab figure, not a purchase figure. No true 100% purchase program exists, so “no money down” always means someone else is supplying the gap.
| Source | What it funds | Repaid when |
|---|---|---|
| Hard money loan | Most of purchase cost, plus rehab draws | Sale or refinance |
| Equity partner | Down payment, closing costs, reserves | Waterfall at payoff |
| Operator | The deal, the scope, daily management | Share of profit |
Loan size runs up to $5,000,000 on the current program, and larger by exception. Property types are non-owner-occupied residential, 1-4 units. Credit starts at a 620 minimum, with extra conditions below 660. Underwriting stays asset-based, but every guarantor still gets an ID check, a credit review, and a background check. Hard money looks past your income. It does not look past you.
Where Does an Equity Partner Fit?
A partner fits when your limit is cash, not credit or deal quality. The partner brings the balance sheet, and you bring the deal and the project management. That is a split of roles, and it should be written down that way.
| Factor | Hard money lender | Equity partner |
|---|---|---|
| Return | Interest-only payments | Share of profit |
| Risk | Secured by the property | Last in line at payoff |
| Control | Draws, inspections | Whatever the JV agreement says |
| Cost to you | Fixed carrying cost | Gives up upside |
An equity partner is usually the most expensive money in profit terms, because you hand over a share of the upside. A lender’s cost is fixed. A partner’s cost grows when the deal does well.
Partner capital can also mean different things. Some partners want a preferred position, getting their money back first and then splitting profit. Others want a plain percentage. Either can work. The point is that the structure is chosen before the contract goes to the lender, not after.
How Do You Structure the Partnership Before You Sign Anything?
Settle roles, entity, and paperwork in that order. Each decision changes what the lender asks for.
Roles. Decide who is the operating partner, who is the capital partner, and who signs the guaranty. Many lenders weigh the partner with the stronger track record. A new flipper with an experienced co-guarantor can sometimes move into a better leverage tier, depending on lender review.
Entity. An LLC usually takes title, signs the note, and acts as the borrower. The guaranty is what puts individuals on the hook. An LLC does not protect you from your own guaranty. A guarantor can owe the debt without ever owning title.
The JV agreement. Keep it short and specific to the project. A good one covers:
- who pays for what: down payment, insurance, utilities, loan payments, and rehab
- the profit split, paid only after all parties are made whole
- a scope-of-work addendum and a legal description of the property
- authority over construction decisions and over accepting a resale offer
- what happens if more capital is needed
- receipts kept by each party, so reimbursements at closing can be supported
Business-purpose framing. These are business-purpose loans on non-owner-occupied investment property. A loan to someone who will live in the property is a different product, and it follows different rules.
What Does the Lender Want to See From a Partner Deal?
The lender wants to see that the ownership chart, the entity papers, and the people signing all tell the same story. A mismatch is a common reason a clean deal stalls.
A typical file includes:
- ID, credit authorization, and background check for each guarantor
- entity documents, including the operating agreement and EIN
- the purchase contract, line-item rehab budget, and comps supporting the ARV
- bank statements showing sourced, seasoned funds, including the partner’s
- an appraisal or broker price opinion
- the personal guaranty
Lenders usually ask owners with meaningful ownership to sign. The cutoff varies by lender, so ask before you assume a minority partner is exempt. Pricing and available terms vary by lender, borrower profile, property type, and full underwriting review.
The partner’s money has to be traceable. A wire from an account that opened last month, funded by an unexplained deposit, will draw questions. Have the partner pull statements before the contract is signed. For the cash side of this, see Lendmire’s piece Do You Need Cash to Close a Hard Money Flip Loan?.
One more point, and it matters. Do not hide a private gap loan behind the primary loan. If the partner’s money is actually a loan, disclose it. Undisclosed subordinate financing is mortgage fraud. Disclosed, it may shrink your leverage or end the file, because two debt payments strain the deal. An equity partnership avoids that, which is part of why it is the cleaner structure.
How Do the Three Tracks Line Up From Contract to Closing?
Run three tracks at once: you, the partner, and the lender with title. The loan cannot fund until all three finish.
| Step | Owner | Done when |
|---|---|---|
| Roles and JV terms agreed | You and partner | Both sign agreement |
| Entity formed, EIN issued | You | Documents in file |
| Partner statements pulled | Partner | Funds sourced and seasoned |
| Scope, budget, comps built | You | Lender accepts plan |
| Guarantor checks cleared | Each guarantor | ID, credit, background done |
| Appraisal or BPO ordered | Lender | Value supports ARV cap |
| Title and insurance cleared | Title and you | Clear to close |
Start the partner’s track before you go under contract. The slowest item is usually the one nobody owns. If the partner’s statements are not ready or the operating agreement does not name the right signer, the lender’s clear-to-close waits on you.
What Happens on Closing Day?
Money moves in a set order, and the order matters. The partner’s cash goes to title first, then the lender releases its funds, then title disburses.
| Order | Action | Who |
|---|---|---|
| 1 | Documents signed for the LLC | Operator, partner as required |
| 2 | Guaranty signed | Each guarantor |
| 3 | Partner’s funds wired to title | Partner |
| 4 | Lender funds the loan | Lender |
| 5 | Title disburses and records | Title company |
The LLC signs the note, the security instrument, the loan agreement, and a business-purpose certification. The owner signs the guaranty. Then the rehab holdback starts. You request a draw as work is completed, an inspection verifies it, and the lender releases that portion. Keep each receipt, because the JV agreement will need them at payoff.
What Does a Deal Look Like From Start to Payoff?
Here is one modeled deal, using percentages instead of dollar amounts. These inputs are assumptions for illustration, not market data.
Assume project cost equals 70% of ARV. Assume the operator has two completed projects, so the loan lands around 90% of project cost. That works out to roughly 63% of ARV, which sits under the 75% ARV cap. The partner funds the remaining 10% of cost, plus closing costs and any cushion the lender wants to see.
Assume the sale closes at ARV and profit after all costs equals 12% of ARV. The waterfall pays the lender first, then returns the partner’s capital, then splits what is left. With an illustrative 50/50 split, each side takes 6% of ARV. Market splits vary widely, and nothing says 50/50 is right for your deal.
Now run the downside. A delay adds carrying cost, and an overrun adds budget. If profit falls to 6% of ARV, each side gets 3%. Cut profit further, and the partner’s preferred position starts to matter more than the split. Write down what happens when a deal underperforms before it does.
Your leverage gets better with a documented track record. A completed flip with clean paperwork helps you qualify for a higher tier next time. That is a concrete reason to keep the receipts.
Where Does the Standard Setup Break?
The standard setup breaks in a handful of named situations. Each one changes who signs, what the lender asks for, or whether the deal is a flip at all.
The partner will not guarantee. This is the most common failure. Either the partner signs, or the guaranty sits with someone who will. A passive partner can still be asked to sign if their ownership is meaningful.
The partner is passive. Here the securities rules matter. The U.S. Supreme Court’s 1946 Howey holding, discussed in an SEC statement on Howey, looks at substance, not labels. A passive investor in a joint venture can still be buying a security, whatever the document is called. As Syndication Attorneys explains, calling it a JV does not control the outcome. Talk to a securities attorney before you take money from someone who will not be doing any of the work.
The money is a loan. Then it is debt, and the primary lender must know about it.
Taxes between partners. Tax treatment varies; consult a qualified professional about how partner profit is reported.
A rental exit. If partners keep the property, the exit is a rent-based refinance, not another flip loan. A flip loan is not a DSCR loan. DSCR compares rent to principal, interest, taxes, insurance, and any association dues, and nothing else. Clearing 1.00 does not mean positive cash flow, because repairs, vacancy, and management sit outside the calculation. 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 walks through how that review works.
What Mistakes Delay Closing?
Most delays trace to paperwork, not the property. The same few mistakes show up on partner files.
- Entity papers do not match the ownership chart. The operating agreement names one set of owners, and the loan application names another.
- A required signer is missing or unwilling. You find out at the term sheet instead of at the handshake.
- The partner’s funds are not sourced. A recent transfer with no paper trail raises questions.
- The budget does not match the scope. A lump-sum rehab number with no line items does not support the draw schedule.
- The JV timeline ignores the loan term. The agreement assumes a year-and-a-half of runway, while the loan expects a sale or refinance inside its 6-18 month window.
- The partner is told only about the upside. Show your downside case before they ask.
Frequently Asked Questions
Does the hard money lender count my partner’s cash toward the down payment?
Usually yes, if it is sourced and seasoned. The lender cares that the cash is real, traceable, and available at closing, not whose name is on the account. Expect to document the partner’s funds the same way you document your own. Requirements vary by lender, property, and experience.
Does my equity partner have to sign the loan?
Often, yes. Lenders typically ask owners with meaningful ownership to sign a guaranty, and the cutoff varies by lender. A partner who refuses any signature can end the file at the term sheet. Decide this before you shake hands, not after.
Can I flip with none of my own money?
Not on a true 100% purchase program, because none exists. The loan funds most of project cost, up to 100% of the rehab budget in draws. Someone has to cover the remaining gap. A partner can supply it, but you are paying for it in profit share and in the work of putting the structure together.
Is a JV with a passive investor a security?
It can be. The securities test looks at whether money goes into a common enterprise expecting profit from others’ work. The label does not decide it. If your partner is passive, speak with a securities attorney.
What happens if the flip does not sell inside the loan term?
Terms run 6-18 months, interest-only, with no prepayment penalty. If the sale slips, the usual options are extending with the lender, selling at a lower price, or refinancing into a rental loan. Your JV agreement should say in advance who decides, who covers extra carrying cost, and how the split changes.
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. As a broker, Lendmire arranges financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Nothing here is a commitment to lend.
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.
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References
1. SEC – Moloney statement on Howey
2. Syndication Attorneys – JV and the SEC
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 a Hard Money Lender Counts Days to Close a Fix and Flip Loan · How a Hard Money Lender Counts Equity as a Flip Down Payment · How a Hard Money Lender Counts Seasoning on a Flip
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.