The Quick Read: The down payment on a 2-4 unit flip depends on the lender’s program or the negotiated deal, not on which label the money carries. Hard money usually means a business with written guidelines. Private money usually means an individual who sets terms by negotiation.
- Both labels are informal. Neither has an official definition, so the lender’s actual terms matter more than the name.
- Hard money programs size the loan off project cost and after-repair value (ARV). The borrower funds the gap.
- Private money terms are negotiated, so the cash you bring can be higher or lower than a program would require.
- Cash needed at closing is more than the down payment. Reserves, closing costs, and interest carry sit on top.
- A DSCR refinance is a common exit when a flip turns into a rental.
The Honest Answer: Who Each Option Is Really For
Hard money fits an investor who wants a written program with known leverage tiers, a draw schedule, and a repeatable process across several flips. Private money fits an investor who has a relationship with an individual lender and wants terms shaped to one deal.
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.
Neither is better in the abstract. A first-time flipper with no lender relationship usually has an easier path through a hard money program. An experienced flipper with a trusted private lender can sometimes negotiate a structure a program would not offer. That flexibility cuts both ways. Negotiated terms can also mean thinner documentation and less certainty when a project runs long.
The labels also blur. Spark Rental describes hard money lenders as asset-based businesses that specialize in short-term purchase-rehab loans, and private lenders as individuals who lend for their own reasons. In practice, some hard money lenders call themselves private lenders. Read the term sheet, not the logo.
Side-by-Side
The hard money column below reflects the leverage tiers on the programs Lendmire’s wholesale network works with. The private money column reflects published industry norms, described with qualifiers, since terms are negotiated one deal at a time.
| Factor | Hard Money (network programs) | Private Money (industry norms) |
|---|---|---|
| Who lends | A business with written guidelines | Often an individual or small group |
| Review basis | Asset-based: property, plan, exit | Usually the deal and the relationship |
| Credit | 620 minimum, added conditions below 660 | Negotiated; often informal |
| Down payment | Set by leverage tier (see below) | Negotiated; can be higher or lower |
| Documentation | Standard file: entity, budget, funds | Varies widely, sometimes thin |
| Property types | Non-owner-occupied, 1-4 units | Usually investment property, by agreement |
| Entity vesting | LLC borrowers common, per program terms | Often possible, by agreement |
| Term | 6-18 months, interest-only | Often negotiated; commonly 6-24 months |
| Rehab funding | Draws against completed work | Draw handling set by agreement |
| Reserves | Expected; varies by lender and experience | Negotiated |
How the Down Payment Actually Works on Hard Money
A hard money flip loan is sized to project cost, then capped by after-repair value. It is not a mortgage-style down payment on price alone. Across the wholesale network, leverage is tiered by documented completed projects. Programs vary by lender, property, and experience.
- 5 or more completed projects: up to 93% of project cost.
- 2 or more completed projects: up to 90% of project cost.
- Fewer than 2 completed projects: up to 85% of project cost.
- Every tier: capped at 75% of after-repair value.
The cap on after-repair value is the number that bites on a 2-4 unit. Say the purchase price is low and the rehab is heavy. The cost-based tier may allow a high percentage, but the 75% ARV ceiling can still trim the loan. The borrower covers the difference. Run both tests before you make an offer.
Rehab money works differently. Up to 100% of the rehab budget can fund in draws against completed work. That is a rehab-budget figure, not a purchase leverage figure. It means the borrower often fronts early rehab costs and is reimbursed as work finishes. Plan liquidity for that float.
There is no true 100% purchase program. A deal that looks like zero down is usually a stack of structures: a loan on cost, draws on rehab, and sometimes another party’s cash. The top tier is reserved for experienced investors, so a first flip sits at the lower tier by design.
For a purchase with no rehab, a bridge loan can run up to 80% of purchase price. Cash-out and rate-and-term refinances on hard money run up to 65% of value. Loan amounts reach $5,000,000, with larger balances by exception. Smaller balances vary by lender.
How the Down Payment Works on Private Money
Private money has no standard formula. The down payment is whatever the two parties agree on. Some private lenders fund a share of purchase price and all of the rehab. Some want a larger stake from the borrower. Some, on an exceptional deal, agree to very little.
Nothing in federal rules sets a minimum. Credit extended for business purposes is generally outside consumer mortgage rules. Regulation Z, section 1026.3 exempts credit extended primarily for a business purpose, and the eCFR text also exempts credit extended to anyone other than a natural person, such as an LLC. So the skin in the game comes from underwriting and negotiation, not from a rule. That also means consumer protections you may expect on a home mortgage often do not apply. Read the contract.
Private lenders also tend to look hard at the deal. Real Estate Skills describes private money as secured by a lien on the property and underwritten on the deal rather than the borrower’s credit. A lower down payment can be offered when the lender trusts the borrower and the numbers. A higher down payment can be asked when the lender is carrying more risk.
Cash to Close Is Bigger Than the Down Payment
The down payment is one line. Investors who budget only for it run short. Both capital types ask you to prove funds and often to show liquidity after closing.
The cash picture on a 2-4 unit flip usually stacks like this:
| Cash Line | Hard Money | Private Money |
|---|---|---|
| Down payment | Gap between cost and loan | Negotiated gap |
| Closing costs | Yes | Yes, by agreement |
| Interest carry | Interest-only during term | Per note terms |
| Early rehab float | Draws reimburse completed work | Per draw agreement |
| Reserves | Expected by most programs | Negotiated |
Interest-only carry matters more on a 2-4 unit than on a single-family home because the purchase price is higher and the rehab scope covers several units. If one unit is vacant and others are occupied, the timeline can stretch while you wait on turnover. Build that into your liquidity plan.
When Hard Money Is the Better Fit
Hard money fits when you want predictability and a documented process. These are the typical cases:
- First or second flip. The leverage tiers are published and the file is a standard one. You know the cash you need before you bid.
- Repeat flipping at scale. Moving from fewer than 2 completed projects to 2 or more, then to 5 or more, steps leverage up. Your track record becomes a financing asset.
- Entity borrowers. An LLC can usually be the borrower, subject to program terms, with standard entity documents in the file.
- A defined rehab budget. Draws against completed work give both sides a clear process.
- A planned exit. Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path. The 6-18 month interest-only term has no multi-year option, so investors who need longer runway refinance into long-term rental financing.
The trade-off is rigidity. A program has guidelines. If your deal sits outside them, the program will not bend the way a person might. Collateral is non-owner-occupied residential property of 1-4 units.
When Private Money Is the Better Fit
Private money fits when a relationship exists and the deal needs a custom shape.
- You already know the lender. A track record with an individual can produce terms a program would not offer.
- The deal is unusual. A negotiated structure can fit a property or timeline that a written program does not.
- You want flexible draw or term structures. Terms are negotiated between the parties.
- You are bringing an equity partner. A profit-split partner who contributes cash is a different structure from borrowed money. The lender still sees your funds, so the partner’s cash needs to be documented.
The risks are real. Some informal private lenders accept a note without a recorded mortgage or deed of trust, which leaves the lender and the borrower exposed. A handshake arrangement can go wrong when a project runs long. Treat a clear written note and a recorded lien as the baseline.
Be careful with fraud. A “lender” who asks for an upfront wired fee or a wired down payment before any documents exist is a red flag.
Stacking Money: Can Private Cash Cover Your Down Payment?
Often not. Many primary lenders want the borrower to have real skin in the game. Gap funding that covers the borrower’s own cash portion can be blocked at underwriting, and lenders that allow a second position are the exception. Do not plan a deal around borrowed down payment money without confirming in writing that the primary lender accepts it.
An equity partner is the cleaner route. The partner contributes cash and takes a share of profit. The borrower shows the funds in the file. That is not a loan, so it does not stack debt on the property. It does reduce your share of the upside.
What Changes at 2-4 Units
A 2-4 unit flip behaves differently from a single-family flip in a few ways that touch cash.
- Higher purchase price. The same percentage down is a larger check.
- Multiple rehab scopes. Each unit adds scope, and draws run against more work.
- Occupancy. Flip loans are generally for non-owner-occupied property. An owner-occupied 2-4 unit purchase is a different, consumer-style transaction and sits outside this comparison.
- Exit choice. A sale is one exit. A refinance into long-term rental financing is the other. Multi-unit properties with rent roll lend themselves to that second exit.
If the property will be held, decide the exit at purchase. A DSCR refinance compares rent to the full monthly obligation on the new loan. Clearing 1.00 is where select programs start, and stronger ratios open better leverage. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. DSCR measures rent against payment only. It does not account for repairs, vacancy, management, or utilities, so a passing ratio is not the same as positive cash flow. Lendmire’s complete DSCR loans guide walks through how the ratio works.
Programs change, and every file is reviewed individually, subject to lender guidelines.
Key Terms Defined
Loan-to-cost: The loan as a percentage of project cost, meaning purchase plus rehab.
After-repair value (ARV): The estimated value of the property once the rehab is finished.
Draw: A release of rehab funds after a portion of the work is completed.
Skin in the game: The borrower’s own cash invested in the deal.
Interest carry: Interest paid during the term before the exit.
Which Should You Choose? A Balanced Verdict
Choose hard money if you want published leverage tiers, a standard file, and a process you can repeat. It is the cleaner path for a first flip or when you have no lender relationship. Choose private money if you have a trusted individual lender and a deal that benefits from custom terms, and you are prepared to document the note and the lien properly.
Either way, price the whole cash requirement, not just the down payment. Add closing costs, interest carry, reserves, and the early rehab float. Then decide the exit before you buy. If the exit is a refinance, that decision shapes which structure makes sense, and it may make sense to run the numbers against long-term financing first.
Tax treatment varies; consult a qualified 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.
Frequently Asked Questions
Are hard money and private money the same thing?
No, though the labels overlap. Hard money usually describes a business that lends against the property under written guidelines. Private money usually describes an individual lender with negotiated terms. Some hard money lenders use the private label, so compare the actual terms rather than the name.
Which one needs less cash upfront?
It depends on the deal. Hard money programs publish leverage tiers, so you can predict the gap. Private money is negotiated, so it can be lower or higher. A low down payment headline still leaves closing costs, interest carry, and reserves.
Can private money cover my hard money down payment?
Often not. Many primary lenders want the borrower to have their own cash in the deal and can block gap funding at underwriting. An equity partner whose funds are documented in the file is a more workable structure. Confirm the lender’s position in writing before you rely on it.
Does a duplex, triplex, or fourplex change the down payment?
The percentage logic is the same, but the purchase price and rehab scope are larger, so the cash check is bigger. The 75% of ARV cap on hard money can also matter more when several units are being renovated. Collateral on network hard money programs is non-owner-occupied residential property of 1-4 units.
What if I’m a first-time flipper?
First-time investors qualify at the lower leverage tiers, which means a larger down payment. The top tier is reserved for experienced investors. Leverage steps up as completed projects are documented.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
About Lendmire
A DSCR-focused mortgage broker, Lendmire (NMLS# 2371349) arranges investor financing across 41 markets, 40 states plus Washington, D.C., with DSCR eligibility generally reviewed by the lender on property cash flow instead of traditional personal-income documentation, subject to lender guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in 2025 and 2026.
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References
1. Spark Rental: Hard Money vs. Private Money
2. CFPB Regulation Z, section 1026.3
4. Real Estate Skills: Private Money Lenders
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Hard Money Loan Qualification Documents for a Flip Investor · Private vs Direct Hard Money Lender Requirements for a Flip Loan · Is There a Limit on a Hard Money Fix-and-Flip Loan?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.