Hard money vs. private money vs. bank loans: which is right for your deal?
2 min read
When you're funding an investment property, the type of money you use matters as much as the deal itself. Here's how the three main options compare, and when each one makes sense.
Bank loans
A traditional bank or conventional mortgage looks mostly at you: your income, debt-to-income ratio, tax returns and credit.
Best for: buy-and-hold properties that are already in good condition, when you have time and strong documented income.
Watch out for: slow closings (often 30 to 45 days or more), strict requirements on the property's condition, and limits on how many financed properties you can have.
Hard money loans
A hard money loan comes from a lender that specializes in short-term investment loans. The focus is on the deal: the purchase price, the rehab budget and the after repair value (ARV).
Best for: fix and flips, properties that need work, and deals where speed wins.
Watch out for: higher rates and points than a bank, and short terms (usually 6 to 24 months), so you need a clear exit plan.
Private money
Private money comes from individuals (friends, family, colleagues or other investors) who lend on your deal, often on terms you negotiate directly.
Best for: covering a down payment or gap that your main lender doesn't fund, or investors with a strong network.
Watch out for: informal arrangements. Always put terms in writing, record the loan properly and make sure everyone understands the risk.
Using them together
Many investors combine them: a hard money loan funds most of the purchase and rehab, and a private money partner covers part of the down payment. My fix & flip calculator lets you add a second loan to see how it changes your profit.
Quick comparison
| Bank loan | Hard money | Private money | |
|---|---|---|---|
| Speed | Slow | Fast | Varies |
| Focus | Your income | The deal | Your relationship |
| Cost | Lowest | Higher | Negotiated |
| Term | 15 to 30 years | 6 to 24 months | Negotiated |
| Property condition | Must be livable | Can need work | Any |
Frequently asked questions
Is hard money the same as private money?
Not quite. Hard money usually comes from a lending company with set loan programs, while private money comes from individuals who lend on terms you negotiate. Both focus more on the deal than a bank does.
Why are hard money loans more expensive than bank loans?
Hard money lenders take on properties that need work, close quickly and lend for short periods, so they charge higher rates and points for that speed and flexibility. For a flip, the cost is often worth it because it lets you win and complete the deal.
Can I refinance a hard money loan into a bank loan?
Yes. A common strategy is to buy and renovate with hard money, then refinance into a long-term loan, such as a DSCR rental loan, once the property is renovated and rented.
Not sure which fits your deal? Let's talk.
Written by Jasmine Brown
Jasmine specializes in financing flips, new construction, DSCR, and multifamily nationwide. As an investor, she brings first-hand experience and strategic insights to her clients. Fund your next deal