Private Money vs. Hard Money: Best Funding Option for First-Time Flippers

Private Money vs. Hard Money: Best Funding Option for First-Time Flippers

(Because even the best deal won’t close without cash on the table)

Let’s face it: you can find the perfect flip, run the numbers like a pro, and have contractors lined up… but if you don’t have the money to close, you’re just playing HGTV in your head.

For most first-time flippers, bank loans aren’t the answer. That’s where private money and hard money come in. They sound similar, but they work differently—and choosing the right one can make or break your first deal.

What Is Private Money?

Private money comes from individual people, not institutions. Think: a family member, friend, colleague, or local investor who has extra capital and wants a return.

• Pros:

  • Flexible terms (you negotiate directly)

  • Often lower fees and interest than hard money

  • Relationship-driven (they may give you more trust + time if things go sideways)

• Cons:

  • You need to build trust (not everyone wants to hand over $100k to a newbie)

  • May not have as much cash available as a hard money lender

Best For: First-time flippers with strong personal networks or the ability to build investor relationships.

What Is Hard Money?

Hard money comes from licensed lenders who specialize in short-term real estate loans. They don’t care about your job history or credit as much—they care about the deal.

• Pros:

  • Faster approvals (sometimes within days)

  • Deal-focused (if the numbers work, you’re in)

  • Access to larger loan amounts than most private lenders

• Cons:

  • Higher interest rates (10–15%+ isn’t unusual)

  • Upfront fees and points (2–5% of the loan)

  • Strict timelines (usually 6–12 months, with no wiggle room)

Best For: First-time flippers who need capital fast, don’t have a big network yet, and are confident their project will turn quickly.

Key Differences (Private vs. Hard Money)

So, Which Should You Choose?

👉 If you have people in your corner who trust you, private money is often the smoother, cheaper option.
👉 If you don’t have that network yet—or need funds quickly—hard money can get you in the game.

The real truth? Most successful investors use both. Start with what you have access to now, then build toward the network you want.

Pro Tips for First-Timers

• Don’t ask for money until you can confidently run the numbers.

• Present the deal like a business plan (ARV, rehab estimate, timeline, exit strategy).

• Always plan for worst-case scenarios (what happens if it doesn’t sell fast?).

• Protect your relationships—sometimes it’s better to pay higher rates to a hard money lender than risk Thanksgiving dinner awkwardness.

Final Word

Both private and hard money are tools. Neither is “better,” but one may be better for you right now. The important part is to get in the game with the right deal structure—and learn as you go.

Ready to Learn the Funding Game?

At REAP, we teach our mentees not just how to flip—but how to find, fund, and finish deals without burning bridges or blowing budgets.

💡 Want to see how private and hard money could work for your first flip? Reach out to Lanny ([email protected] ) or Roy ([email protected] ) and let’s talk about how we can help.

Dad Joke Bonus:
Why don’t oysters share their pearls?
Because they’re a little shellfish. 🦪