How is private (hard money) lending different from a bank loan?

We are asset-based, which means we underwrite the property, its equity, and your business plan rather than your personal income and tax returns. That lets us fund in days instead of the 30 to 60+ days a bank takes, on short interest-only terms built around a flip, refinance, or sale. You pay a higher rate than a bank in exchange for speed, flexibility, and certainty on deals a bank cannot fund in time.

How fast can you close?

Fix and flip and residential bridge loans typically close in 5 to 7 days once we have your basics. Rental (DSCR) loans usually take 2 to 3 weeks because of the appraisal and rent verification, and SBA financing runs 30 to 90 days. The biggest variable is how quickly title, insurance, and your documents come together.

Do you check credit, and is there a minimum score?

We do run credit, but on our asset-based loans it carries far less weight than at a bank, and weaker credit can often be offset with a larger down payment or lower leverage. There is no personal income test on these programs. Credit matters most on long-term rental loans, where we look for a 640 minimum and it affects your rate and leverage.

Do I need to provide income documents or tax returns?

Generally no. Our bridge, fix and flip, and construction loans qualify off the property and your equity, and our DSCR rental loans qualify off the property's rent, so we do not ask for W-2s or pay stubs. We will want to see bank statements or proof of reserves. SBA and conventional investment loans are the exceptions and are fully documented.

What do you need to give me a quote?

Just the basics of the deal: the property address or type, the purchase price or current value, your rehab budget, the loan amount, and your exit plan. We can often pre-qualify you over the phone or through a short application and issue a proof-of-funds letter before you are even under contract.

What is a point, and how do your rates compare to a bank?

A point is an upfront fee equal to 1% of the loan amount, and origination on private loans typically runs 1 to 3 points. Our rates are higher than a bank, generally in the high single digits to low teens depending on the program, because the loans are short, fast, and flexible. When you compare offers, weigh the rate and the points together as your true cost of capital.

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Strategy · 6 min read

Which Return Metric Should Drive Your Buy

The short answer

Cap rate, cash-on-cash and DSCR answer different questions. Which one should decide a purchase, which is a comparison tool, and which one your lender actually uses.

Three numbers get quoted on every rental deal, and they are not interchangeable. Using the wrong one to make the decision is how investors end up owning something that looks good on a spreadsheet and starves them of cash.

Cap rate: comparing assets, not deciding

Cap rate is NOI divided by price. It contains no financing at all, which is precisely what makes it useful: it lets you compare two buildings without your loan terms distorting the picture.

And precisely what makes it a poor decision metric. It tells you nothing about whether the deal works for you, at your leverage, with your cost of capital. Two investors buying the same building at the same cap rate can have completely different outcomes.

Use it to compare. Do not use it to decide.

Cash-on-cash: what you actually earn

Cash-on-cash is annual pre-tax cash flow divided by cash invested. This is the number that answers "what is my money earning", and it is the one most investors should lead with, because it includes financing.

Its weakness is that it flatters leverage. Push leverage up, put less cash in, and cash-on-cash rises even as the deal gets more fragile. A high cash-on-cash on thin coverage is a deal with no margin for a vacancy.

DSCR: whether it survives

On a rental, DSCR is the monthly rent divided by the full monthly payment - principal, interest, taxes, insurance and any HOA. At 1.00 the rent exactly covers the payment and nothing else. At 0.90 it does not. On commercial deals the same ratio is expressed as NOI over debt service; the question it answers is identical.

It is not a return metric at all. It is a durability metric.

This is also the number your lender qualifies on. Our DSCR program goes from 0.75, which means a property can qualify while still needing support from you. That is a real option, and it should be a deliberate choice rather than a surprise. How to calculate DSCR works through it.

How to use all three

Cap rate to shortlist and compare. Is this priced sensibly for the submarket?
DSCR to check survival. Does it carry itself, and will it still at a realistic vacancy?
Cash-on-cash to decide. Is this the strongest use of the capital I am about to commit?

Run a deal that clears all three and you have something. Run one that clears only cash-on-cash and you have leverage dressed up as a return.

The one none of them capture

None of these include your total cost of capital on entry, or a prepayment penalty on exit. Add both before you commit.

Model them in the cap rate calculator and the DSCR calculator. Not a commitment to lend.

Frequently asked

Should cap rate decide whether I buy?

Is a high cash-on-cash return always good?

Which number does the lender care about?

Rates, leverage, and timelines mentioned in this guide are typical figures, subject to underwriting and market conditions. Not a commitment to lend. Nothing here is legal, tax, or investment advice.

Related programs

Rental / DSCR Conventional Investment CRE Permanent

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DSCR Loan vs Hard Money Loan DSCR Loan vs Conventional Loan

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