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You can often locate private lenders via real estate agents and mortgage brokers; by attending landlord meetings or investment seminars; or by joining a real estate investment group and doing a little networking. Most private lenders loan money through mortgage brokers because most states require that lenders be licensed.
Making up the difference with a gap loan
One of the big drawbacks to hard money loans is that they come up short — you may not get all the money you need to buy, hold, and fix the property. This is where gap loans come into play. With a gap loan, a private investor or partner puts up the rest of the money in exchange for a cut of the profits. The gap loan covers any remainder of the purchase price, all carrying costs (including payments to the hard money lender), and the costs of repairs and renovations.
The benefit of a gap loan is that you get to flip a property with zero out-of-pocket expenses. The drawback is that it costs you a significant chunk of any profit you earn.