The Quick Read: It depends on your cash, your track record and how much of the profit you want to keep. A hard money loan fits when you have a solid deal, some completed flips and cash for the down payment, while an equity partner fits when you lack the cash or track record, since the partner’s share of profit grows as the flip does better. A loan costs you a known, capped amount, and a partner costs you a slice of whatever the flip earns.
- A hard money loan is underwritten on the property, the rehab plan and the exit, though credit and experience still count.
- An equity partner is a co-owner, not a lender, so no interest is owed and a share of profit is.
- Loans usually cost less on a single, short flip. Partners can win on large or long projects.
- Many flips use both: the partner covers the cash gap, and the loan funds the rest.
- No program is a commitment to lend. Terms vary by lender, property, and experience.
How Do the Two Options Compare?
The core difference is what you give up. A loan takes a fixed cost and requires repayment. A partner takes a share of the outcome and requires no repayment if the flip fails, although the partner often gets paid ahead of you.
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.
| Factor | Hard Money Loan | Equity Partner |
|---|---|---|
| What it is | Debt secured by the property | Co-ownership in your entity |
| Cost shape | Fixed, known up front | Share of profit, known at sale |
| Cost if flip does great | Stays the same | Rises with the profit |
| Cash you bring | Down payment plus working capital | Possibly none |
| Control | You decide | Shared, per the agreement |
| Downside if flip loses | You still owe the loan | Partner absorbs part of the loss |
| Best fit | Repeatable, solid-margin flips | Cash-short or first-time flippers |
What Does a Hard Money Loan Require?
A hard money loan requires real skin in the game. Across the wholesale network Lendmire places files with, fix-and-flip leverage is tied to loan-to-cost, meaning the loan as a share of total project cost, and it steps up with your documented completed projects. These figures vary by lender, property, and experience.
- 85% of project cost with fewer than two completed projects.
- 90% of project cost at two or more completed projects.
- 93% of project cost at five or more completed projects.
- Every tier is capped at 75% of after-repair value (ARV, the projected resale value once the work is done).
Up to 100% of the rehab budget funds in draws against completed work. A draw is a payout released after an inspector confirms that a stage of the work is done. That means you front the cost of each stage and get reimbursed afterward, so working capital matters as much as the down payment.
There is no true 100% purchase program. Anyone who says otherwise is describing a hybrid with a partner.
Terms run 6 to 18 months, interest-only, with no prepayment penalty. Loan sizes go up to $5,000,000, with larger loans handled by exception. A 620 credit score is the minimum, with additional conditions below 660. Collateral is non-owner-occupied residential property of one to four units. First-time investors qualify at the lower leverage tiers, so the top tier belongs to experienced flippers. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
How Does an Equity Partner Deal Work?
An equity partner buys into the project. The deal usually sits in a new LLC, the partner receives an ownership interest, and a written agreement spells out contributions, roles, decision authority and the exit. Skipping that document is the most expensive shortcut in this business.
Profit usually flows through a waterfall, which is the order in which cash gets paid out:
1. Return of each partner’s capital.
2. A preferred return to the money partner, meaning a priority share of profit before the split. It accrues but is not guaranteed.
3. A promote or catch-up for the operator, who does the work.
4. The remaining profit, split by agreement.
A simpler option splits profit in proportion to the cash each side contributed. That is easy to administer, but it ignores the operator’s sweat equity, so many operators push for a waterfall.
Which One Costs More?
On a single, short flip, the loan usually costs less. An equity partner who takes half the profit collects more on a good deal than a lender’s fees and interest would. The partner’s cost also climbs when the flip outperforms, which is the part new flippers miss.
| Outcome | Loan cost to you | Partner’s take |
|---|---|---|
| Flip underperforms | Same fixed cost | Smaller share, because profit is smaller |
| Flip hits target | Same fixed cost | The agreed share |
| Flip outperforms | Same fixed cost | Larger share, because profit is larger |
A loan’s cost does not care how well you do, though it grows with time because interest runs while you hold. So the crossover is predictable. Large, long or slow projects let interest and fees pile up, and a partner can then come out cheaper. Short, high-margin flips that need little capital favor the partner only if you have no cash to bring.
Gross profit is thinner than it was a year ago. Typical gross profit has fallen compared with a year earlier per ATTOM, and the typical gross return has slid as well according to WRE News. Gross profit is before rehab, financing, holding and selling costs, and HousingWire notes that industry participants cautioned that gross margin figures alone do not show what investors keep in net returns.
Hold time matters too. ATTOM’s state-level flipping data shows a median flip time of 165 days, and that is the stretch your capital cost runs against.
Giving half of a shrinking profit to a partner hurts. Paying a known cost to a lender hurts less when you can afford to bring the cash.
Can You Use Both on One Flip?
Yes, and it is common. In the hybrid structure, the partner funds the down payment or the cash gap, and the hard money lender funds the rest of the purchase and the rehab draws. The lender gets paid either way, and the partner carries the equity risk.
There is one mechanical catch. Many hard money lenders restrict a second lien recorded behind theirs, because it eats into their cushion. So the partner’s money usually goes into the borrowing entity as equity, not as a lien on the property. Confirm this with the lender before you promise a partner a recorded position.
A partner can also help a newer flipper qualify. Leverage tiers follow documented completed projects, so a partner with a flipping record, stronger credit or a bigger cash contribution can improve the file. Who signs, who is on the entity and whose experience counts all depend on the lender’s guidelines.
How Do You Decide? Five Questions
- How much cash can you bring? If you can cover the down payment and working capital for draws, lean toward the loan. If you cannot, you need a partner.
- How experienced are you? Fewer than two completed projects means the lowest leverage tier, which means more cash from you. A partner can fill that gap.
- How big and how long is the project? Large or slow rehabs let interest build, which makes a partner more attractive. Short, tight rehabs favor the loan.
- Will you do this again? Repeat flippers usually prefer fixed-cost capital, because splitting profit on every deal is expensive once you scale.
- Is the margin thin? Thin deals leave little profit to share. ATTOM’s first-quarter data shows flips bought under $50,000 had a typical 14% loss, while purchases between $100,000 and $200,000 returned about 32%. On a thin deal, a partner’s slice can erase your return.
Edge Cases That Change the Answer
Paying the partner like a lender. Many investors skip the profit split and pay a partner a fixed return plus a small slice of net profit. Price that against what a loan would cost, and the partner may accept. The rule of thumb: interest means lender, and a share of proceeds means partner.
Securities rules. If a partner is purely passive, a profit-share arrangement can be treated as a security regardless of what you call it. Syndication Attorneys explains that labeling a deal a joint venture offers no protection when the economics are passive. This is not legal advice, so talk to a securities attorney before you take money from people who will not work on the deal.
Who signs for the loan. The operating partner or a guarantor often signs for the loan, while a capital partner limits exposure to the equity contributed. A passive partner may still end up on title.
When the flip becomes a rental. Many investors refinance out of hard money into long-term rental financing once the property is stabilized, and Lendmire brokers that path through its wholesale network. Read the complete DSCR loans guide to see how DSCR lender review works. If a partner is in the deal, their stake must either be bought out or sit inside the borrowing entity, and ownership must be disclosed to the lender.
Mistakes That Sink These Deals
- Treating hard money as a no-cash option. The loan covers only part of the cost, and you carry the gap plus the draw lag.
- Taking a partner for 100% funding with no written agreement.
- Promising a recorded lien to a partner without checking the lender’s rules.
- Reading a big gross profit as a big net profit.
- Using a partner on every flip once you can afford fixed-cost capital.
- Choosing neither when the margin is too thin to pay for any capital.
Key Terms Defined
ARV (after-repair value): the projected resale value of the property once the work is finished.
Loan-to-cost: the loan amount as a share of total project cost, including purchase and rehab.
Draw: a payment of rehab funds released after an inspection confirms completed work.
Waterfall: the order in which a partnership’s cash is paid out, from return of capital to the final split.
Preferred return: a priority share of profit owed to the money partner before the remaining split.
Recourse: a lender’s right to collect from the person who signed, not only from the property.
Frequently Asked Questions
Is an equity partner cheaper than hard money?
Usually not on a single flip. A loan’s cost is fixed, while a partner’s share rises as profit rises. A partner can come out cheaper on large or long projects where interest and fees pile up.
Can I flip with no money of my own?
Rarely. A hard money loan needs a down payment, and the lowest leverage tier is 85% of project cost, so expect to bring cash. A partner who funds the gap is the realistic route, and it costs you a share of profit.
Does a partner help me qualify for a loan?
Often, yes. Leverage tiers follow documented completed projects, so a partner with flips behind them can improve the file. Approval depends on the lender’s guidelines, who signs, and credit, and credit starts at a 620 minimum with extra conditions below 660.
What happens if the partner and I disagree?
The written agreement decides. It should cover budget overruns, price cuts, sale timing and buyout or exit steps. Without those terms, a deadlock can stall the project past the loan term.
Can a partner take a lien behind the hard money lender?
Many lenders restrict it because it weakens their cushion, so confirm with the lender first. The usual fix is for the partner to hold equity in the borrowing entity instead.
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. The next flip you take on will likely come down to whether you hold the cash, and that answer tells you which kind of capital to ask for first.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage focused on investor financing, arranging DSCR loans in 40 states plus Washington, D.C. — 41 markets total. Qualification is based on the property’s income rather than personal income documentation, subject to lender guidelines, making it a fit for LLC-held rentals and scaling portfolios. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 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. ATTOM: Flip profits and ROI trends
2. WRE News: Home flipping returns and ATTOM profit margin
3. HousingWire
4. ATTOM: Home flipping trends by state
6. Syndication Attorneys: JV labels and SEC review
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 Preapproval Documents Before You Make Offers · How to Replace Seller Financing With a Hard Money Loan on a First Flip · How to Get Rehab Draws Released on a Hard Money Loan
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
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.