The Core Difference
Commercial banks lending on investment property underwrite the borrower first — credit, global cash flow, debt schedules, and personal guarantees. Private money lenders underwrite the deal first — property value, exit strategy, and the borrower's ability to execute.
Speed
- Bank investor financing: 30–60 days, sometimes longer with conditions.
- Private money: 7–14 days on clean files, sometimes faster.
Leverage and Flexibility
- Bank: Typically 65–75% LTV on stabilized investment property; rarely funds rehab; portfolio caps and global DTI rules apply.
- Private money: Up to 90% LTC + 100% of rehab on fix & flip; LLC vesting standard; no portfolio cap on DSCR.
Cost
Banks are cheaper on rate. Private money carries higher rates and origination points. The honest question isn't cost in isolation — it's cost per closed deal. A 10% rate on a deal you actually win beats an 8% rate on one you lose to a faster bidder. Speed and certainty have measurable value in competitive markets.
Documentation
- Bank: Two years of tax returns, K-1s, full financial statements, debt schedules, and personal guarantees.
- Private money: Property package, scope of work, ARV, credit, and reserves. No personal income docs required for most investor programs.
When to Use Each
- Bank investor financing: Stabilized commercial assets and long-term refinances where speed isn't a factor.
- Private money: Fix & flips, value-add bridge, fast acquisitions, LLC vesting, and scaling beyond bank portfolio limits.