Hard money vs conventional financing for a Pittsburgh flip

Hard money closes in 7-14 days, funds rehab, and works on distressed properties at 9-12% interest plus 1.5-3 points. Conventional financing is dramatically cheaper (~7.5% in 2026, no points beyond standard fees) but takes 30-60 days to close, requires conventional condition (no major repairs needed), and almost never funds rehab. For a typical Pittsburgh flip on a distressed property, hard money is the only option that closes - the higher cost is buying speed and access, not just capital. Take a Brighton Heights single-family flip with $48k purchase + $42k rehab: hard money costs ~$8,500 in interest + points; conventional simply cannot close the deal.

The side-by-side

When hard money is the right choice

Fix-and-flip purchases

Most flip-able Pittsburgh properties are not eligible for conventional financing because they need major repairs. A property with a non-functional kitchen, broken HVAC, or active leaks will not appraise as habitable - conventional lenders will not fund. Hard money lenders do not care about move-in readiness; they care about the after-repair value.

Sheriff sales and auction purchases

Auction timelines (typically 30 days from win to full payment) are incompatible with conventional 30-60 day closes. See how to finance a sheriff sale purchase.

BRRRR acquisitions

BRRRR specifically pairs hard money (acquisition + rehab) with conventional/DSCR (long-term refinance). Trying to skip the hard money leg means you cannot buy distressed in the first place. See how to calculate a BRRRR deal.

Competitive bid situations

"Cash equivalent" close in 10 days often beats a higher offer with conventional financing - sellers value certainty. Hard money makes you cash-competitive without depleting your bank account.

When conventional financing is the right choice

• Stabilized rental purchase on a habitable property where the seller's timeline accommodates 30-45 days.
• Primary residence (with or without house-hacking).
• Refinance leg of a BRRRR after seasoning - you specifically want the long-term, low-rate financing for the hold.
• Portfolio cash-out refinance on already-owned rentals.

Same Brighton Heights flip, both financings: full numbers

3BR/1BA distressed single-family. Purchase $48,000, rehab $42,000, ARV $180,000, planned 6-month total project (4 months rehab + 2 months listing).

Hard money structure

• Loan: 90% of purchase ($43,200) + 100% of rehab ($42,000) = $85,200 total advance, drawn in stages.
• Rate: 11% interest-only.
• Points: 2 ($1,704) + standard closing $2,500.
• Cash to close: $4,800 down + $1,704 points + $2,500 closing = $9,004 cash in.
• Interest carry: average outstanding balance ~$60,000 over 6 months at 11% = ~$3,300.
• Total cost of capital: ~$5,000 (points) + ~$3,300 (interest) = ~$8,300

Conventional structure (hypothetical - this property would not qualify)

• Property must be habitable - it is not. Lender will not fund.
• Even if it were habitable: 25% down ($12,000), no rehab funding, 7.5% rate.
• You bring 25% down + 100% of rehab + closing = $12,000 + $42,000 + $1,500 = $55,500 cash in.
• Interest carry: $36,000 loan at 7.5% over 6 months = ~$1,350.
• Total cost of capital: ~$1,500 (closing) + ~$1,350 (interest) = ~$2,850

What this comparison actually shows

Conventional looks dramatically cheaper on paper ($2,850 vs $8,300) - but it is irrelevant because conventional cannot close the deal. The real comparison is "hard money or no deal." On stabilized properties where conventional can fund, the calculation flips - conventional wins on cost by 5-10x.

Also note the cash-in difference: hard money requires $9,000 to control a $90,000 project. Conventional requires $55,000 to control the same project (if it could fund). Hard money's leverage on cash-in is what enables BRRRR investors to scale.

The hybrid: hard money to conventional refi (BRRRR pattern)

The best-of-both approach: use hard money for acquisition + rehab, then refinance into conventional or DSCR financing once stabilized (typically 6 months seasoning). You pay hard money's premium for ~6 months and conventional's lower rate for the remaining 30 years. See the BRRRR walk-through for the full mechanics.

How to shop hard money lenders in Pittsburgh

• Get rate sheets from 3+ lenders before you need them. Rates and points vary by 100-200 bps.
• Confirm draw schedule. Some lenders fund rehab in 3-4 draws, some in 8-10. More draws = more inspection delays.
• Confirm exit fees. A 1-2% exit/payoff fee adds real cost; not all lenders charge them.
• Confirm interest reserve treatment. Some lenders capitalize interest into the loan (no monthly payment); others bill monthly. Cash flow impact is significant.
• Confirm condition flexibility. "We lend on distressed" varies in practice. Confirm with examples.
• Confirm familiarity with Pittsburgh-area appraisers. Out-of-area lenders sometimes use AVMs that miss Pittsburgh's block-by-block variance.

Common financing mistakes

• Trying to use conventional for a flip. If the property needs more than cosmetic work, the appraisal will fail. Pivot to hard money or pass.
• Underestimating points and closing as a cost. 2 points + closing on a $90k loan is $4,300 - that comes off your profit.
• Ignoring the timeline cost. Hard money's 11% on a 4-month rehab is $3,300; on an 8-month rehab it doubles to $6,600. Timeline discipline is a financing decision.
• Not pre-qualifying. Pre-qualify with hard money before you make offers. Closing speed is the value prop - do not lose it on the back end.
• Refinancing too early. If your DSCR lender requires 6 months seasoning, plan the hard money term accordingly. Refinancing at month 5 instead of 7 is a 2-month interest cost.