The Four Main Financing Routes
| Option | Best For |
|---|---|
| Hard money | Distressed properties, fast closes, ARV-based lending |
| Private money (individual lenders) | Relationship-based deals, often more flexible terms than institutional hard money |
| HELOC on another property | Flippers with equity elsewhere and lower-cost capital available |
| Cash | Maximum speed and negotiating leverage, ties up capital fully |
Most active flippers use a mix — hard money or private money for the deal itself, with cash or a HELOC reserved for the down payment, rehab overruns, or holding costs if the timeline runs long.
What Hard Money and Private Money Lenders Look For
- The deal itself — ARV, rehab scope, and exit strategy matter more than personal income documentation.
- Experience — first-time flippers may face higher rates, lower leverage, or a requirement to work with an experienced contractor or partner.
- Skin in the game — most lenders want you to bring some of your own capital, even on an ARV-based loan.
- A realistic budget and timeline — lenders have seen enough flips to spot an unrealistic rehab estimate quickly.
Line up financing before you shop for properties. A pre-approval or an established relationship with a hard money lender lets you move within days when the right deal appears, rather than losing it while you search for capital.
Ready to see the real numbers on a deal? Compare financing scenarios directly in the profit calculator before you commit.
Open the Profit CalculatorA Worked Example: Hard Money Cost on a Typical Deal
Hard money is priced in two pieces — points (an upfront fee, usually 2–4% of the loan amount) and an interest rate, usually 10–13% for California fix-and-flip lending as of 2026. Both matter, and flippers who compare lenders on rate alone often miss the bigger swing that comes from points and loan term.
| Item | Lender A | Lender B |
|---|---|---|
| Loan amount | $400,000 | $400,000 |
| Points | 2% = $8,000 | 3% = $12,000 |
| Interest rate | 12% | 10.5% |
| Hold period | 5 months | 5 months |
| Interest cost (5 mo.) | $20,000 | $17,500 |
| Total financing cost | $28,000 | $29,500 |
Lender A's higher rate actually costs less overall on this timeline because its points are lower — the opposite of what a rate-only comparison would suggest. The math flips again on a longer hold: extend both loans to 8 months and Lender B's lower rate starts to close the gap and can eventually pull ahead. This is why financing costs need to be modeled against your actual expected timeline, not compared as a single headline rate, and why a realistic hold period estimate (see how long a flip typically takes) matters as much as the loan terms themselves.
Financing Mistakes That Erode Margin
- Comparing only the interest rate, ignoring points, junk fees, draw-schedule fees, and any prepayment penalty for paying off early once the flip sells.
- Underestimating the hold period, which compounds directly into interest cost — a flip that runs two months longer than planned on a $400,000 loan at 12% adds roughly $8,000 in interest alone.
- Not confirming the draw schedule before closing. Hard money for rehab is usually released in draws tied to inspected progress, and a slow draw process can stall a contractor and extend the timeline it was supposed to fund.
- Financing 100% of the rehab budget with no reserve. Most lenders won't fund overruns mid-project, leaving the flipper to cover scope creep out of pocket exactly when cash is tightest.
- Ignoring the exit clause. Some hard money loans include a minimum interest period or prepayment penalty, which can erase the benefit of selling ahead of schedule — worth confirming before closing, not after the flip sells early.
None of this argues against hard money as a tool — for most flippers it's the only realistic way to move fast enough to compete for good deals. It argues for reading the full term sheet, not just the headline rate, and for building financing cost into the offer price the same way rehab and holding costs are.