How to Structure a Deal Using Both Hard Money and Private Money (Without Conflict)?

[Kwok Wong]

Hey everyone,

I’m working on structuring my first few fix and flip deals, and I’m a bit confused about how to properly combine Hard Money Lenders (HMLs) and Private Money Lenders (PMLs).

From what I understand, most HMLs want to be in first position and don’t allow any second position liens. But at the same time, many PMLs want to be secured by a promissory note and lien on the property.

So how are experienced investors actually doing it when they say they use both HML and PML money to fund deals with “no money out of pocket”?

Are PMLs just providing unsecured gap funding, or is there a legitimate way to structure it where everyone’s protected and the HML stays comfortable?

Appreciate any clarification or real-world examples from those who’ve been through it.

Thanks in advance! 

[Patrick Roberts]

Hard money is private money in most cases. Most people colloquially refer to friends and family loans as "private money". People who are not professional lenders have no business lending money in second position or offering unsecured funding on a fix and flip. On the flipside, most professional lenders are not going to do this because it's extremely high risk.

100% financing is a myth. You will have to bring equity capital to the table.