There’s no single “best” way to finance an investment property. The right loan depends on the deal, your timeline, and what you plan to do with the property. Here’s how the three main options stack up.
The quick comparison
| Hard money lender | Private money (individual) | Bank / conventional / DSCR | |
|---|---|---|---|
| Speed | Days to a couple of weeks | Varies widely | 30–60+ days |
| Based on | Property + deal | Relationship + deal | Borrower income/credit (or rental income for DSCR) |
| Property condition | Distressed is fine | Depends on the person | Must be livable |
| Rehab funding | Usually yes | Sometimes | Rarely |
| Term | Short (months) | Negotiable | Long (15–30 years) |
| Cost | Higher rate + points | Negotiable | Lowest |
| Process | Professional, repeatable | Informal; can be inconsistent | Heavy paperwork |
Hard money lenders
A hard money lender is a business that makes short-term, asset-based real estate loans. That’s us.
Best for: fix-and-flips, distressed purchases, quick closings, bridge financing, and any deal where the property won’t qualify for a bank loan yet.
Pros:
- Fast decisions and closings
- Lends against the property’s value, including after-repair value
- Funds rehab
- Professional process: term sheet, attorney-drafted docs, title company closing
Cons:
- More expensive than bank money
- Short terms, so you need a clear exit
Private money from individuals
This is borrowing from someone you know: a friend, a family member, a business contact, or another investor with cash to deploy.
Best for: investors with a strong network, experienced operators, and creative structures.
Pros:
- Can be very flexible on terms
- Sometimes cheaper than hard money
- Can be a long-term relationship
Cons:
- Speed and reliability depend entirely on that person and their cash availability
- Often informal, and missing documents or a fuzzy agreement can cause real problems later
- Mixing money and relationships is risky if a deal goes sideways
If you go this route, paper it properly: a real promissory note, a recorded deed of trust, title insurance, and the lender named on the insurance policy. Protect both of you.
Bank, conventional, and DSCR loans
Traditional mortgage products, including DSCR loans (debt-service coverage ratio loans that qualify based on rental income instead of personal income).
Best for: long-term holds on properties that are already in good, rentable condition.
Pros:
- Lowest cost of capital
- Long fixed terms
- Ideal for buy-and-hold portfolios
Cons:
- Slow
- Property usually has to be in good condition
- Lots of paperwork; some programs limit how many loans you can have
- Won’t fund a rehab on a distressed property
How experienced investors combine them
The smart move is often using more than one. A really common path:
- Buy with hard money. Close fast on a distressed property, with rehab funded.
- Renovate.
- Either sell (a flip, where the hard money gets paid off at closing)
- Or refinance into a DSCR or conventional loan (a BRRRR-style hold, where the long-term loan pays off the hard money).
Hard money is the short-term tool that gets you into the deal; bank money is the long-term tool that lets you hold it cheaply.
Questions to ask yourself
- How fast do I need to close? If the answer is “this week,” a bank isn’t an option.
- Is the property livable today? If not, you probably need hard money.
- What’s my exit? Sale or refinance, and how long will that take?
- Do the numbers still work with financing costs included? If not, it’s not a deal. Don’t force it.
Need a quick answer on a deal?
Tell us about it. Even if hard money isn’t the right fit, I’ll tell you what probably is.
Related: What is a hard money loan? · Bridge loans
Have a deal you want funded? Tell us about it. You'll hear back from Greg directly.