The Quick Read: Usually, no: a first-time flipper can often get approved for hard money, but the rehab portion of the loan is held back and released as reimbursement after inspected work, so you generally pay for the first phase of renovation yourself before any draw arrives, unless a contractor extends terms or a lender structures it differently. Approval depends on the deal. The cash you need depends on timing.
- Experience mostly changes leverage, not eligibility. First-timers sit at the lowest leverage tier.
- Up to 100% of the rehab budget can fund in draws, but only against completed work.
- Plan cash for the down payment, closing costs, interest carry, and the first rehab phase.
- Contractor payment terms and a right-sized scope are the practical ways to shrink the gap.
- Terms vary by lender, property, and experience, and nothing here is a commitment to lend.
Key Terms Defined
Draw: a scheduled release of rehab money from the lender after a stage of work is finished.
Holdback: the rehab portion of the loan that the lender keeps in reserve instead of handing it to you at closing.
Fronting: paying contractors out of your own pocket first, then getting reimbursed when the lender funds the draw.
Loan-to-cost: the loan amount as a share of total project cost, meaning purchase plus rehab.
ARV (after-repair value): what the property should be worth once the renovation is done.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
What Does Fronting Draws Actually Mean?
Fronting means you pay first and the lender repays you later. It is a timing problem, not a leverage problem. The loan may cover the rehab budget on paper, yet the cash arrives only after work is done and verified.
Here is the part that trips up beginners. Advertising that mentions funding up to 100% of the rehab budget is accurate. It does not mean the money is in your account on day one.
Across the wholesale network Lendmire works with, the pattern is consistent. Purchase funds go to the seller at closing. The rehab money sits in holdback. A stage of work gets finished, the lender verifies it, and then the draw is released.
That order creates a gap. Your contractor needs materials and labor money before the first draw can exist. Someone has to cover that gap, and for a first-timer it is usually you.
Can a First-Timer Get Approved at All?
Yes, generally. Hard money is underwritten on the property, the rehab plan, and the exit, not on a flipping résumé. Credit still counts, with a 620 minimum score on the programs in the network and added conditions below 660. These loans are for non-owner-occupied residential property of one to four units, and they are business-purpose loans reviewed differently from an owner-occupied mortgage.
Experience shows up in how much the lender will advance. Fix-and-flip leverage on typical network programs is tiered by completed projects, and every tier is capped at 75% of after-repair value:
| Completed projects | Leverage (of project cost) | Cap |
|---|---|---|
| Fewer than 2 | 85% | 75% of ARV |
| 2 or more | 90% | 75% of ARV |
| 5 or more | 93% | 75% of ARV |
The top tier is reserved for experienced investors, so a first-timer starts in the first row. Figures like these vary by lender, property, and experience. The ARV cap often binds before the cost percentage does, which is why a conservative ARV matters more than a clever pitch.
Two other terms are worth knowing. Loans are interest-only for 6-18 months with no prepayment penalty. Loan sizes run up to $5,000,000, with larger loans by exception.
Some lenders also count adjacent work as experience. A general contractor license, a real estate license, or renovating your own rentals may help. Whether it moves you up a tier is the lender’s call.
How Do Draws Work Step by Step?
The sequence is the same on most files, even though each lender’s details differ. Each step has an owner and a lag, and the lags are where a first-timer’s cash gets stretched.
1. Scope and budget. You submit a line-item plan. The lender usually wants the work broken into stages, and those stages become the draw schedule.
2. Closing. The lender funds the purchase side. The rehab money goes into holdback.
3. Phase one, on you. Demo, rough-in, or whatever comes first is paid from your cash or your contractor’s credit.
4. Draw request. You submit invoices, photos, and permits showing the stage is done.
5. Inspection. The lender verifies the work. Many lenders charge an inspection fee per draw, plus a wire fee, so ask for the schedule of fees.
6. Release. The lender reimburses you. Release is not instant, and the lag varies by lender, so ask how it works before you sign.
7. Repeat. Each later stage rides the same cycle, and your float shrinks as reimbursements arrive.
Contractor cooperation matters here as much as the lender. A contractor who will not work to the draw schedule can stall the whole job.
Where the Float Actually Comes From
The float is the cash you have out before reimbursement lands. It peaks right before the first draw. Here is the shape of it across a typical rehab:
| Stage | Who pays | Your cash exposure |
|---|---|---|
| Closing | Lender funds purchase side | Down payment and closing costs |
| Phase one work | You or your contractor | Highest point |
| First draw released | Lender reimburses | Drops as you are repaid |
| Later phases | Mix of draws and your cash | Smaller, repeating gaps |
| Final draw and exit | Lender, then sale or refinance | Interest carry continues until exit |
Notice that the down payment is a separate bucket from the float. First-timers often budget for one and forget the other. Add interest carry for the whole hold, and the real cash requirement is larger than the down payment alone.
Picture an investor at the 85% of project cost tier who has the down payment ready. The project has a six-stage scope. That investor still needs to cover stage one and the carry, or the first draw never gets requested.
Can You Shrink the Float?
Partly, yes. You cannot count on removing it. These are the realistic options, each with a tradeoff:
| Option | Benefit | Risk | Best for |
|---|---|---|---|
| Smaller, cosmetic scope | Less cash needed before the first draw | Smaller upside | True beginners |
| Contractor payment terms | Contractor carries materials or labor | Needs a vetted, willing GC | Borrowers with a trusted contractor |
| Small deposit plus milestone pay | Keeps the contractor committed | Deposit is at risk if work stalls | Larger scopes |
| Cash reserve for phase one | Keeps the schedule on track | Ties up liquidity | Most first flips |
| Partner capital | Adds funds without new debt | Shared profit, shared control | Borrowers short on cash |
Tell your contractor up front that you are on a draw schedule. Many established contractors have supplier credit and can front materials, and they would rather know early than be surprised. Treat that as a negotiation, not a guarantee.
A few lenders structure things differently, and a lender may advance more flexibly to experienced borrowers. As a first-timer, do not build your plan on that. Ask each lender how they handle first-phase funds, and get the answer in writing before you commit.
One more caution on deposits. Handing a large sum to a contractor you have not vetted is a bigger risk than the float itself. Keep deposits modest and tie the rest to finished milestones.
Why Thin Margins Make the Float Matter
Flipping profits have compressed, so delays hurt more. ATTOM’s year-end flipping report put the typical flip’s gross return at 25.5%, the lowest since 2008, and CNBC reported a typical gross profit of $65,981 on the same data.
Gross profit is before your carry, fees, and surprises. A draw that arrives late or an inspection that fails burns interest-only carry on a loan that runs 6-18 months. That is why liquidity planning belongs in the deal math, not in an afterthought.
What Goes Wrong on a First Flip
The failures repeat, and most are avoidable.
- Over-scoping. A first project with structural work, permits, and a long schedule multiplies the float and the carry.
- Paying ahead of progress. Paying a contractor for work not yet done leaves you exposed if the job stalls.
- No reserves. Budgeting exactly to the dollar means one delayed draw stops the job.
- An optimistic ARV. The 75% of ARV cap means a soft ARV shrinks your loan, which grows your cash need.
- Treating the advertised funding as day-one cash. Funding for the rehab budget means reimbursement against completed work.
A stalled draw also pressures the contractor. If they are waiting on you and you are waiting on the lender, schedule slips follow. Agree in writing on how each stage is verified before work starts.
Self-Check Before You Apply
Answer these honestly. If you say no to more than one, shrink the project or add capital first.
- Do you have the down payment, closing costs, and interest carry in cash?
- Can you also cover the first rehab phase without touching those funds?
- Is your scope sized to a project you can finish within the loan term?
- Does your contractor understand the draw schedule and agree to it?
- Is your ARV based on conservative comparable sales?
- Do you know your lender’s inspection fees, draw minimums, and extension options?
Do not plan on holding the loan longer than the term. Ask each lender what extension options exist and what they cost.
What Happens After the Flip?
Not every flip ends in a sale. Many investors refinance out of hard money into long-term DSCR financing once the property is renovated and rented, and Lendmire brokers that path. The complete DSCR loans guide explains how the rental-coverage test works.
Keep one point straight. A DSCR loan compares rent to the full monthly obligation. Clearing that test does not mean the property has positive cash flow after repairs, vacancy, and management.
Tax treatment varies; consult a qualified professional before relying on any deduction.
Frequently Asked Questions
Can I get hard money with no flipping experience?
Often yes, at the lowest leverage tier. On typical network programs that is 85% of project cost, capped at 75% of after-repair value, with a 620 minimum score and added conditions below 660. Eligibility is underwritten on the property, plan, and exit, and terms vary by lender, property, and experience.
Does the lender pay my contractor directly?
That depends on the lender, so ask. Many structures reimburse the borrower after inspected work, while some pay the contractor on approval. Either way, the rehab money is held back and released against completed work, not handed over at closing.
Is there a true 100% hard money program?
No. The real structure is leverage on project cost, with up to 100% of the rehab budget released in draws against finished work. You still bring a down payment and cover the first phase, so any claim of no money down deserves skepticism.
Can I start with a cosmetic flip?
Yes, and for many first-timers it is the smarter start. A lighter scope means a smaller first phase, fewer draws, and less carry. It also builds the completed-project record that moves you toward higher leverage tiers.
What if a draw is delayed or an inspection fails?
Your carry keeps running and your contractor keeps waiting. That is why a cash reserve beyond the first phase matters. Fix the flagged work, request re-inspection, and ask your lender up front how failed inspections are handled.
Next Step
If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. Lendmire arranges these loans through select lenders in its wholesale network across 41 markets, including Washington, D.C.
About Lendmire
A DSCR-focused mortgage broker, Lendmire (NMLS# 2371349) places investor financing across 41 markets, 40 states plus Washington, D.C., with DSCR eligibility generally reviewed by the lender on property cash flow instead of traditional personal-income documentation, subject to lender guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. attomdata.com: Year End Home Flipping Report
2. CNBC – Home flippers see smallest profits since the Great Recession
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Move From Flips to a 5-to-10-Unit Building With Hard Money · How to Refinance a Hard Money Flip Into a DSCR Loan Early · Cash vs Gap Loan vs Hard Money Modification for a Scaling Flipper
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.