What is the difference between private money and hard money for investors?

Private money comes from individuals or informal capital partners with negotiated terms. Hard money comes from professional asset-based lenders with standardized term sheets, milestone draws, and 7–14 business day closes at 8.99%–13.5% interest-only on qualified non-owner-occupied files.

When should a non-owner-occupied investor use private money instead of hard money?

Use private money when you have a trusted capital partner, need custom subordination or hold terms, or are filling a small gap outside a licensed lender's LTC cap. Use hard money when you need repeatable draw discipline, speed, and documented exit to sale or DSCR refi at 5.75%–10.5%.

Can private money or hard money bridge into DSCR permanent debt?

Yes — that is the standard BRRRR stack. Bridge at 8.99%–13.5% IO funds acquisition and rehab; once the property is rehab-complete with an executed lease and DSCR clears 1.0+ at target LTV, refinance into DSCR permanent at 5.75%–10.5%.

Blog

Private Money vs Hard Money for Real Estate Investors

Published June 12, 2026 · Updated July 18, 2026

By Jason Taken · Principal, Jaken Finance Group

Private vs hard money for non-owner-occupied investors — 8.99%–13.5% IO bridge, 5.75%–10.5% DSCR hold, LTC sizing, exit paths, and worked BRRRR example.

Private money and hard money both sit outside bank agency channels — but they are not the same product. For non-owner-occupied investors, the practical split is this: private money is relationship capital with custom terms; hard money is professional bridge debt sized on ARV, LTC, scope, and a documented exit (sale or DSCR refi). Jaken Finance Group underwrites 8.99%–13.5% interest-only bridge on qualified investment-property files and 5.75%–10.5% DSCR permanent once rent supports the hold thesis.

This guide compares private money vs hard money for real estate investors — rate bands, leverage, speed, file discipline, and a worked BRRRR example you can drop into a spreadsheet before LOI.

Private money vs hard money — definitions

Private money lending means borrowing from an individual, family office, or small private fund — not a chartered bank. Terms are negotiated deal-by-deal: rate, maturity, subordination, prepayment, and whether draws are inspection-based or trust-based. Some sponsors use private notes for the entire stack; others use private capital only for gap between hard money LTC and all-in project cost.

Hard money lending means borrowing from a licensed asset-based lender with a published term sheet. Underwriting anchors on sold comps, scope + contingency, entity vesting, and exit — not W-2 DTI. Draws release on milestone inspections; extensions are policy-driven, not handshake extensions.

Both are business-purpose debt on non-owner-occupied collateral. Jaken Finance Group finances investment property only — not primary residences.

What is hard money · Private money lenders hub · Hard money vs DSCR comparison.

Side-by-side comparison — investor view

Factor	Private money	Hard money (bridge)
Capital source	Individual, JV, localized fund	Licensed asset-based lender
Rate band (2026)	Negotiated — often 8%–15%+	8.99%–13.5% IO (qualified files)
Term	Custom — months to years	6–18 months typical
Close speed	Days to weeks — relationship-dependent	7–14 business days with complete file
Sizing basis	Negotiated LTV/LTC	85%–90% LTC on ARV-supported deals
Draw discipline	Often informal	Milestone inspections + draw schedule
Repeatability	Limited by partner capital	Portfolio programs, cross-collateral options
Documentation	Varies — counsel strongly advised	Standard term sheet, UCC, insurance, entity
Best for	Custom hold, gap, trusted partner	Flip, BRRRR bridge, auction, heavy value-add
Hold exit	Negotiated refi or sale	Sale or DSCR 5.75%–10.5% refi

Rule of thumb: Private money buys flexibility; hard money buys speed, leverage, and file repeatability.

Rate and product bands — what investors actually pay

Qualified non-owner-occupied files at Jaken Finance Group run these bands in 2026:

Product	Rate	Payment	Term	Qualification
Hard money / bridge	8.99%–13.5%	Interest-only	6–18 mo	ARV, LTC, exit plan
DSCR permanent	5.75%–10.5%	P&I (30 yr typical)	Long-term hold	Executed lease, DSCR 1.0+

Bridge is not a hold mortgage. Every IO month without rent or sale burns spread. DSCR is the designed stabilized exit when the asset generates rental income.

Monthly carry — same $180,000 loan balance

Product	Rate	Monthly payment
Hard money IO	10.5%	$1,575
Hard money IO	12.5%	$1,875
DSCR P&I (30 yr)	6.75%	~$1,167
DSCR P&I (30 yr)	8.25%	~$1,357

Switching from 11% IO bridge to 7% DSCR P&I on a $180K balance saves roughly $350–$450/mo — often more than refi closing costs if you refi immediately after lease-up instead of carrying bridge an extra quarter.

When investors choose private money

Private money fits specific scenarios where a licensed bridge desk cannot match the structure:

Trusted partner with patient capital — hold periods longer than 18 months without sale pressure
Gap fill — all-in exceeds 90% LTC on hard money; private second or equity fills the delta
Custom subordination — seller carry, partial seller note, or intra-portfolio stacking
Off-market relationship deal — partner funds acquisition while you source permanent takeout
Small balance — deals under minimum loan amounts some lenders publish

Underwriting reality: Informal private notes without recorded liens, clear priority, or draw controls create title and default risk. Document every private dollar with counsel — or route acquisition through a hard money term sheet and keep private capital in the equity slot.

Understanding gap financing · Private and hard money for beginners.

When investors choose hard money

Hard money is the default bridge for non-owner-occupied investors when:

Scenario	Why hard money
Fix-and-flip	Short hold, rehab draws, exit = sale within 4–9 months
BRRRR	Acquire + rehab → lease → DSCR refi at 5.75%–10.5%
Auction / REO	7–14 day close beats bank
Distressed condition	Collateral-first — banks want turnkey
LLC vesting	Business-purpose entity file
Portfolio velocity	Repeat borrower, cross-collateral release terms

Hard money underwriters reject files with no exit — bridge without a sale pro forma or DSCR path becomes indefinite high-IO carry.

Using hard money to invest · Fix and flip requirements · Hard money for buy-and-hold bridge.

Worked example — BRRRR with hard money bridge → DSCR exit

Market: Midwest SFR, non-owner-occupied, LLC vesting.

Acquisition + rehab:

Line	Amount
Purchase	$165,000
Rehab (scope + 12% contingency)	$42,000
All-in basis	$207,000
ARV (sold comps support)	$265,000

Hard money bridge:

Line	Value
LTC funded	90% → $186,300 note
Rate	10.25% IO
Monthly IO	~$1,591
Sponsor cash-in	~$20,700 + closing

Hold timeline: 2 months acquisition + 4 months rehab + 1 month lease-up = 7 months bridge

Carry line	Amount
IO interest (7 mo @ $1,591)	~$11,137
Points + bridge closing (approx.)	~$5,500
Total bridge cost (approx.)	~$16,637

Stabilization: Executed lease at $1,650/mo. Appraisal $262,000.

DSCR refi at 75% LTV:

Line	Value
Loan amount	$196,500
DSCR rate	7.125% P&I (30 yr)
Monthly P&I	~$1,323
DSCR ratio (approx.)	~1.15 at quoted PITIA

Cash-out after bridge payoff: ~$10,200 before refi costs — deployable to door two if the next acquisition is already underwritten.

Lesson: The spread between 10.25% IO and 7.125% P&I saves ~$268/mo once refi closes. Each extra bridge month after lease costs ~$1,591 with zero rent improvement — order appraisal at certificate of occupancy, not after cosmetic punch-list drift.

DSCR calculator · Indiana hard money vs DSCR switch playbook · Scale portfolio 1–10 doors.

Private + hard money stacking — common portfolio pattern

Sophisticated sponsors rarely choose only one source. A repeatable stack:

Layer	Source	Role
Senior bridge	Hard money 8.99%–13.5% IO	85%–90% LTC, milestone draws
Gap / mezz	Private partner or equity	Remaining 10%–15% all-in
Permanent	DSCR 5.75%–10.5%	Pay off bridge; extract equity for scale

Misalignment kills deals: private second without subordination agreement and recorded lien can block hard money close. Align all capital sources before LOI — not at draw three.

File package — private vs hard money submission

Document	Hard money desk	Private partner
Purchase contract / LOI	Required	Required
Sold comps (3+)	Required for ARV	Recommended
Scope + bids + contingency	Required	If rehab involved
Entity docs (LLC OA, EIN)	Required	Recommended
Exit letter / pro forma	Sale or DSCR path	Negotiated
Insurance (landlord quote)	Required	Recommended
Liquidity statement	Required	Trust-based
Written note / term sheet	N/A (lender term sheet)	Required with counsel

Incomplete hard money files queue behind complete packages. Private deals fail when verbal terms diverge from recorded documents at refi or sale.

Checklist — evaluating hard money proposals · Loan process.

Risks investors underwrite before locking terms

Risk	Private money	Hard money
Indefinite IO carry	Extension by handshake — rate may jump	Maturity + extension policy — model +1–2 months
Lien priority dispute	High if undocumented	Lower — standardized recording
Draw overrun	Informal draws inflate basis	Inspection gates slow scope creep
ARV miss	Partner may not re-advance	Appraisal below pro forma — sponsor fills gap
DSCR miss at refi	Partner may force sale	Bridge payoff from sale or cash-in
Regulatory	Usury / licensing by state	Licensed lender compliance

Stress ARV −10%, +1 month carry, and DSCR at 0.95 before you lock scope — dual-exit files (sale and refi path) survive 2026 carry pressure.

Decision matrix — pick the right capital source

Your situation	Lead with
First flip, auction timeline, no private partner	Hard money bridge → sale
BRRRR, value-add hold, documented lease plan	Hard money → DSCR 5.75%–10.5%
Stabilized turnkey with executed lease	DSCR — skip bridge
All-in exceeds 90% LTC, trusted partner	Hard money senior + private gap
Long hold, patient partner, custom terms	Private money (documented)
Owner-occupied purchase	Neither — Jaken Finance Group finances non-owner-occupied only