The Quick Read: Yes, a hard money loan can fund both the purchase and the repairs on a rental, because the lender sizes the loan against the project’s cost and its after-repair value instead of the rent the property earns today, and it releases the repair money in draws as work gets finished. Most investors then refinance into long-term rental financing once the property is fixed and leased. Everything below is typical for select lenders in a wholesale network and varies by lender, property, and experience.
- Leverage: fix-and-flip style loans typically run 85% to 93% of project cost, depending on completed projects, and never above 75% of after-repair value.
- Repairs: up to 100% of the rehab budget can fund in draws, but draws reimburse finished work, so you need cash up front.
- Term: typically 6 to 18 months, interest-only, with no prepayment penalty.
- Property: non-owner-occupied residential, 1 to 4 units.
- Exit: you plan the refinance or sale before you buy, not after the rehab.
How Does One Loan Cover Both the Purchase and the Repairs?
One hard money loan splits into two buckets. The first bucket pays the seller at closing. The second bucket is a rehab holdback that the lender keeps and releases as you finish the work. You see one loan and one payoff, but the money moves in stages.
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.
Hard money is also called private, bridge, or transitional lending. The National Private Lenders Association has encouraged its members to use those softer labels, according to Wikipedia’s entry on commercial hard money. Searchers still type “hard money,” so this article uses both.
The lender cares about the asset first. It looks at what you pay, what you will spend, and what the finished property should be worth. Your credit still matters, and so do your cash and your experience. But rent is not what services the loan during the rehab, because the property usually has no tenant yet.
That is the core difference from a DSCR loan. DSCR (debt service coverage ratio) compares a property’s rent to its full monthly obligation. Select DSCR programs want a property that is livable and leasable at closing. A kitchen-less or gutted house cannot show rent, so it fits a bridge loan instead.
Light cosmetic work is a gray area. If the property is rentable and appraises as-is, a DSCR purchase can work. If it isn’t, hard money is the tool.
How Much Will a Lender Actually Lend?
Leverage on a rehab is tiered by how many projects you have completed, and every tier has a hard ceiling tied to the finished value. Across the select lenders in Lendmire’s network, a hard money program typically sizes like this. Exact terms vary by lender, property, and experience.
| Scenario | Typical maximum |
|---|---|
| Fix-and-flip, 5+ completed projects | 93% of project cost |
| Fix-and-flip, 2+ completed projects | 90% of project cost |
| Fix-and-flip, fewer than 2 projects | 85% of project cost |
| Cap on every tier above | 75% of after-repair value |
| Bridge purchase, no rehab | Up to 80% of purchase price |
| Cash-out or rate-and-term refinance | Up to 65% of value |
| Rehab budget | Up to 100% of the budget, funded in draws |
Read the table carefully. The 100% figure applies to the rehab budget only. It is not a purchase loan-to-value. There is no true 100% purchase program, and anyone who says otherwise is describing a different structure.
Loan sizes run up to $5,000,000, with larger loans handled by exception. Smaller balances vary by lender. Credit starts around a 620 score, with added conditions below 660. First-time investors can qualify, but at the lower leverage tiers, since the top tier is reserved for experienced investors.
A consumer-finance explainer from SmartAsset puts hard money terms at 12 to 36 months. Select lenders in Lendmire’s network run shorter, at 6 to 18 months, and there are no multi-year options. Plan around the network figure.
How Do Rehab Draws Work?
A draw is a scheduled release of repair money after a stage of work is done and inspected. The lender does not hand you the whole budget at closing. You pay your contractor, finish a stage, request a draw, the lender inspects, and the lender reimburses you.
Here is the usual sequence:
1. Close on the purchase. The lender funds the acquisition portion and holds the rehab budget back.
2. Start work using your own cash for the first stage.
3. Submit a draw request with photos, invoices, or lien waivers.
4. The lender sends an inspector to confirm the work.
5. The lender releases funds for the completed stage.
6. Repeat until the scope is done.
The catch is cash timing. Even when 100% of the rehab budget is financed, you front each stage and get paid back later. That means you need liquidity beyond the down payment. Build a cushion for the first stage, for stages where an inspection is delayed, and for overruns.
Contractors also have views on this. Many want a deposit and progress payments on their own schedule. Agree on a payment schedule that matches the draw schedule before you sign anything.
A Worked Example: Where the 75% Cap Bites
The 75% after-repair cap is the part investors miss. Run the numbers on a modeled project where the after-repair value is set to 100 and the project cost is shown as a percentage of it. These are modeled assumptions, not market data.
| Project cost (% of ARV) | Completed projects | Tier on cost | Loan after the 75% cap |
|---|---|---|---|
| 70% | Fewer than 2 | 85% of cost = 59.5% of ARV | 59.5% of ARV |
| 70% | 2+ | 90% of cost = 63% of ARV | 63% of ARV |
| 85% | 2+ | 90% of cost = 76.5% of ARV | 75% of ARV |
| 85% | 5+ | 93% of cost = 79.05% of ARV | 75% of ARV |
On the first two rows, the tier governs. On the last two, the cap governs, and your experience tier stops mattering. You fund the gap, which is also why a thin deal that “pencils” at 93% of cost may not pencil at all once the cap applies.
Now the rental check. Say the finished property rents for enough that the long-term loan’s full payment is covered at roughly 1.2x. That is a healthy coverage ratio and a comfortable place to start the refinance conversation. But clearing 1.00 or 1.2x is not the same as positive cash flow. DSCR compares rent to PITIA (principal, interest, taxes, insurance, and any HOA dues). Repairs, vacancy, management, utilities, and capital expenses sit outside it.
Which Repairs and Property Types Fit?
Hard money works best when the scope is clear and the work adds livability or rentability. Typical fits include:
- Kitchens and bathrooms in a house that has been stripped or neglected.
- Roofs, systems, and structural repairs on distressed property.
- Deferred maintenance that keeps a house from appraising or leasing.
- Layout changes and full interior renovations.
The collateral rules are firm. Hard money programs in the network are for non-owner-occupied residential property of 1 to 4 units, and ground-up construction goes to 10 units. Commercial, industrial, land, hospitality, and owner-occupied property are not offered.
Scope matters for pricing and eligibility. A light cosmetic job and a heavy rehab get different treatment, especially if the budget is large compared with the purchase price. Lenders may ask for more experience, a detailed scope of work, and a general contractor’s bid. A lender may also set a minimum initial disbursement, which means a bigger check from you at closing.
What Do Lenders Look At Besides the Property?
Underwriting stays asset-based, but it is not paperwork-free. A typical file includes the purchase contract, a line-item scope of work, a repair budget, comparable sales supporting the after-repair value, proof of funds, and ID. Entity documents come in if you buy through an LLC, subject to program terms.
On the borrower side, lenders weigh four things:
- Cash and liquidity. Rent is not servicing the debt, so lenders want to see you can carry the loan and fund each stage.
- Experience. Completed projects set your leverage tier. A thin track record means lower leverage, not automatic denial.
- Credit. A 620 score is the typical floor, with extra conditions below 660.
- The plan. A clear exit counts as much as the property does.
Hard money does not ignore credit, and it isn’t underwriting-free. It is asset-first. That is a different thing.
Who Can Borrow, and Why “Investment Property” Isn’t the Whole Test
Hard money loans for rentals are business-purpose loans. They are designed for non-owner-occupied investment property, and they are reviewed differently from a standard owner-occupied mortgage. Federal rules exempt business-purpose credit from certain consumer-credit requirements, but the creditor decides in each case whether the loan is primarily for an exempt purpose.
The label on the property does not decide this. The purpose of the loan does, and owner-occupied rentals carry unit-count thresholds. So do not assume a house is exempt just because you plan to rent it. Plan to buy it as an investor, in the way the lender’s program expects.
The Exit: Refinancing Into a Rental Loan
The exit is the most important part of a hard money deal, and you should plan it at purchase. A 6 to 18 month interest-only term has to cover the rehab, the lease-up, any seasoning period, the appraisal, and underwriting on the new loan. Vaster notes that these loans carry higher costs and require a solid exit, and that matches what a broker sees across files.
Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path. Lendmire’s complete DSCR loans guide covers how those loans work in more depth.
Here is what the exit lender typically wants across the network:
- A finished, leased property. The work is done and a tenant is in place or market rent is documented.
- Seasoning. Seasoning is the waiting period between buying a property and refinancing it. For a cash-out refinance, about 6 months is the common expectation, though it varies by lender and program.
- Leverage that fits. A cash-out refinance on a standard rental tops out around 75% LTV across most of the network.
- Coverage. A 1.00 ratio is where select programs start, not a universal floor. Stronger ratios open better pricing and leverage. Coverage below 1.00 is available through select lenders in the network, with leverage and terms adjusted.
- Credit. Around 660 is typical, and 700+ unlocks the strongest leverage tiers. A 620 floor exists in parts of the network.
- Reserves. These are cash held back after closing. They commonly run about 6 months of PITIA, and they vary by lender, leverage, loan size, and transaction type.
A larger down payment lowers the payment and can lift the coverage ratio. It never erases leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage.
What if the exit slips? Appraisals come in light, repairs run long, and tenants take time. The honest options are to extend the bridge with the lender if the program allows it, refinance the hard money loan itself (typically up to 65% of value), sell, or bring in more cash. Each has costs. Ask about extension terms before you close, because you don’t want to learn them in month 15.
What Does It Cost Beyond the Interest?
Pricing varies by lender and sits outside this article, but the cost categories are predictable. Budget for:
- Interest through the full rehab, lease-up, and refinance window.
- Origination and lender fees.
- Draw and inspection fees at each release.
- Insurance for a vacant or under-construction property.
- Title, appraisal, and legal costs.
- Holding costs: utilities, taxes, and lawn or snow care.
- An interest reserve in case the schedule slips.
Interest-only terms with no prepayment penalty help here, since an early payoff doesn’t cost you extra.
How Does Hard Money Compare With the Alternatives?
Hard money is not the only way to buy and repair, but it is often the only one that fits a distressed rental.
| Option | Fits a buy-and-repair rental? | Main trade-off |
|---|---|---|
| Hard money | Yes | Short term, needs a planned exit |
| DSCR purchase loan | Only if rent-ready | Property must be livable and leasable |
| All cash | Yes | Ties up capital |
| Owner-occupant renovation loan | No | Built for primary residences |
Owner-occupant renovation products are designed for people who will live in the home. They do not apply to a pure rental. A DSCR purchase loan can work when the property is rentable now, typically at 75% to 80% LTV, with select high-leverage programs reaching 85% for roughly a 700+ score. If it isn’t rentable, the two-loan path is usually cleaner. Lendmire’s article Hard Money Bridge vs. Direct DSCR Loan to Buy a Rental Package compares the two for a larger purchase.
Who Should Skip It, and Common Mistakes
Skip hard money if the property is already rentable and appraises as-is. A direct DSCR loan costs less in structure and has no exit risk. Skip it too if you have no cash cushion for the first draw, or if you can’t name a realistic exit.
Common mistakes include:
- Budgeting repairs at 100% financed and forgetting you front each stage.
- Choosing a term that ends before the lease-up and seasoning are done.
- Never checking the exit lender’s appraisal, rent, and seasoning rules.
- Assuming a top-tier leverage figure applies when the 75% after-repair cap binds.
- Underestimating the scope, then running out of cash before the final draw.
Some investors recycle capital through repeated buy, repair, lease, refinance cycles. That works, but each cycle needs its own exit plan. One bad appraisal can stall the whole chain.
Key Terms Defined
Hard money loan: a short-term, asset-based loan from a private or non-bank lender, secured by the property.
After-repair value (ARV): the estimated value of the property once the planned work is done.
Loan-to-cost: the loan amount as a percentage of the purchase price plus the repair budget.
Rehab holdback: repair money the lender keeps and releases in draws.
Draw: a scheduled release of holdback funds after a stage of work is inspected.
Seasoning: the waiting period a lender wants between buying a property and refinancing it.
PITIA: principal, interest, taxes, insurance, and any association dues, the full monthly obligation used in DSCR math.
Reserves: cash you keep on hand after closing to cover payments if the property has a rough stretch.
Frequently Asked Questions
Can I finance 100% of the repairs?
Often, yes, up to 100% of the rehab budget can be funded in draws on select programs. The money reimburses finished, inspected work, so you need cash to start each stage. The purchase side is separate and never reaches 100%, and terms vary by lender, property, and experience.
Can a first-time investor get one?
Yes, but usually at the lower leverage tier, around 85% of project cost, still capped at 75% of after-repair value. Lenders often want to see a clear scope, real liquidity, and a believable exit, since experience is thin.
What if I can’t refinance when the term ends?
Talk to the lender before the term runs out, since options may include an extension, a hard money refinance, or a sale. A refinance at that stage typically sizes lower, up to about 65% of value. Terms run 6 to 18 months with no multi-year options, so build slack into the plan.
Does the loan work for a duplex or fourplex?
Yes. Hard money programs cover non-owner-occupied residential property of 1 to 4 units. Ground-up construction can go to 10 units. Commercial, land, hospitality, and owner-occupied property are not offered.
Can I use a DSCR loan instead of hard money?
Only when the property is livable and leasable at closing. DSCR loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines, so a house with no kitchen has no rent to measure. For light cosmetic work on a rentable property, a direct DSCR purchase may fit.
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 mortgage broker arranging financing through select lenders in its wholesale network, across 41 markets including Washington, D.C. Programs change, every file is underwritten individually, and nothing here is a commitment to lend.
The strongest rehab loans are the ones where the refinance was already penciled in on the day the purchase closed.
About Lendmire
As a non-QM mortgage broker (NMLS# 2371349), Lendmire facilitates DSCR investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income instead of personal income documentation, subject to lender guidelines, serving LLC-structured portfolios and self-employed borrowers who don’t fit conventional boxes. A two-time Scotsman Guide Top Mortgage Workplace (2025, 2026).
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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. Wikipedia: Commercial hard money
2. SmartAsset: Hard money loans
3. CFPB: Regulation Z § 1026.3
4. Compliance Alliance: Regulation Z and investment properties
5. Vaster: What is a hard money loan
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a DSCR Refinance Close Before Hard Money Maturity on a Long Rehab? · Hard Money Loan ARV Requirements in a Small Town With No Comps · Can You Use a HELOC on Your Primary Home to Buy a Rental Property?
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.