Private Money vs Hard Money: Fix & Flip EXPLAINED
If you’ve ever looked into fixing and flipping houses or building a rental portfolio through BRRRR (Buy, Rehab, Rent, Refinance, Repeat), you’ve probably heard two terms thrown around constantly: private money and hard money.
They sound similar.
They are not.
Understanding the difference between these two funding sources is one of the most important things a real estate investor can learn. It affects how much profit you keep, how much control you have, and how fast you can scale.
Let’s break it down in simple terms.
What Is Hard Money?
Hard money is a loan from a professional real estate lending company. These companies exist for one purpose: lending to investors who buy distressed properties, fix them up, and either sell or refinance.
Hard money lenders are not banks. They don’t care much about your W-2 income or your credit score. They care about one thing:
The deal.
They look at:
Purchase price
Rehab cost
After Repair Value (ARV)
Loan-to-value ratios
How quickly they get paid back
If the deal makes sense on paper, they will lend.
The tradeoff is cost. Hard money is expensive.
You will usually pay:
9%–14% interest
1–4 points upfront
Interest-only monthly payments
Strict draw schedules for renovations
Hard money is fast and reliable, but it is rigid. You are operating inside their system.
What Is Private Money?
Private money comes from people, not companies.
These are:
Business owners
Doctors
Retirees
Friends of friends
Anyone with cash who wants a safe return
Private lenders are not real estate experts. They are investors looking for:
Predictable returns
Security
Someone they trust
They are investing in you, not just the house.
Because of that, private money is usually:
Cheaper
More flexible
Less paperwork
Relationship-based
Private money is not regulated like a lender. Terms are negotiated between you and the investor.
This is how experienced real estate investors quietly scale.
The Big Difference: Who Controls the Deal
This is the part no one talks about.
With hard money, the lender controls:
When renovation funds are released
How long you have to finish
Whether you get an extension
Whether you default
If the project takes longer than expected, you pay penalties. If the refinance takes too long, you pay more interest. If you miss deadlines, you’re at risk.
With private money, you and the investor work together.
You can structure:
Deferred payments
Interest-only payments
Longer timelines
Refinance exits
You are not fighting a system. You’re working with a person.
That difference alone can save tens of thousands of dollars per deal.
Which One Is Better for Fix-and-Flips?
Both can work.
Hard money is common for flips because:
It’s fast
It’s designed for short-term deals
Lenders understand ARV
Private money is better because:
You pay less interest
You avoid points
You keep more profit
Most new investors use hard money first.
Most experienced investors use private money.
Which One Is Better for BRRRR?
Private money wins by a mile.
BRRRR requires time:
Rehab
Tenant placement
Seasoning
Refinance
Hard money hates time. The longer you hold, the more it costs.
Private money loves BRRRR because:
You can offer steady returns
You refinance them out
They get their capital back
You repeat
This is how investors build portfolios without using their own cash.
Why Smart Investors Transition to Private Money
Hard money helps you start.
Private money helps you scale.
Hard money is like renting equipment.
Private money is like owning it.
When you control your capital, you control your business.
You stop asking:
“Can I do this deal?”
And start asking:
“How many deals do I want to do?”
The Real Estate Wealth Formula
The biggest real estate portfolios are not built by people with the most money.
They are built by people with:
The most relationships
The most trust
The best systems
Private money is not about being rich.
It’s about being reliable.
“Two are better than one, because they have a good return for their labor.” — Ecclesiastes 4:9