The conventional wisdom is that banks are for long-term holds and private lenders are for short-term plays. The reality is more nuanced. The right financing tool depends on your deal type, timeline, entity structure, and how many properties you own — not just the rate.
Where Banks Win
Rate. A conventional bank portfolio loan at 7% beats a DSCR loan at 8.5% on a 30-year hold. If you have clean income documentation, a traditional banking relationship, and you're not in a hurry, conventional bank financing is the cheapest capital. Banks also have lower origination costs on stabilized, clean properties.
Where Private Lenders Win
Speed: Private lenders close in 5–14 days vs 30–90 days for banks. Flexibility: Private lenders will lend on properties banks won't touch — distressed condition, low occupancy, unusual title, short ownership history. Scale: Banks typically cap the number of investment properties on your personal credit. Private lenders care about the asset, not how many loans you have. Self-employed: Private lenders don't require 2 years of tax returns showing traditional income.
The True Cost Comparison
A 1% rate difference on a $300K loan is $3,000/year, or $250/month. If closing faster on a deal at a 1% higher rate generates an extra $20K in equity, the higher rate was the better financial decision. Always compare lender options on total deal economics — not rate alone.
Using Both Together
Smart investors use private lending to acquire and stabilize, then refinance into bank or agency financing for the long term. Bridge or hard money in, DSCR or conventional out. This preserves your conventional loan capacity for the cleanest assets while using private capital for the value-add work.
