The Quick Read: Usually yes for a true flip, because a hard money loan funds the purchase and the rehab against the property’s after-repair value, runs on a short interest-only term, and is underwritten mainly on the deal rather than on your income. That holds only when the margin can absorb the full cost of the loan and the exit is planned before you close. It is the wrong tool for a rent-ready property you plan to hold.
- Leverage is tied to the project. On the network’s program, it runs up to 93% of project cost for experienced investors, always capped at 75% of after-repair value.
- Rehab money comes in draws against completed work, not up front.
- Terms are short and interest-only, so the exit has to be a sale or a refinance.
- The cost is more than the headline interest, and flip margins have been thinning.
- A DSCR loan is the hold-and-rent loan, not the rehab loan.
Every figure below varies by lender, property, and experience, and nothing here is a commitment to lend.
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.
When Does Hard Money Fit a Flip, and When Doesn’t It?
Hard money fits when the property needs work a bank will not finance, the purchase has to be made on a seller’s schedule, and the resale margin is wide enough to pay for short-term capital. It fails when the margin is thin, the scope is vague, or the plan is to keep the property as a rental.
Think of it as a project loan. The lender looks at the purchase price, the rehab budget, and what the house should be worth when the work is done. That last number is the after-repair value, or ARV. Your credit still gets reviewed, but the property and the plan carry most of the weight.
Hard money tends to fit these situations:
- A distressed property that a conventional lender would not finance in its current condition.
- A flip where you need most of the purchase and the rehab funded, and you want to keep cash for the next deal.
- A seller who favors certainty over price, which matters because cash buyers dominate the flip market. HousingWire’s coverage of ATTOM data shows cash purchases made up 61.1% of flipped homes in the first quarter covered.
It fits poorly in these situations:
- The margin only works if everything goes right.
- The property is rent-ready and the plan is to hold it.
- The rehab scope is still a guess.
- You have no cash for the gap between loan funding and draw reimbursement.
How Does the Money Move on a Hard Money Flip?
A hard money flip moves through six stages: underwriting the deal, reviewing the borrower, funding the purchase, releasing rehab draws, carrying the interest-only loan, and exiting by sale or refinance. The draws and the exit are where files get tight.
1. Underwrite the deal. The lender reviews the purchase contract, the rehab budget, and the ARV. An ARV that rests on weak comps is a common reason a leverage request gets cut back.
2. Review the borrower. Credit gets checked. On the network’s program the minimum score is 620, with additional conditions below 660. Your track record also matters, because the leverage tier you land in depends on how many projects you have completed.
3. Fund the purchase. The loan pays for the property and holds back the rehab money.
4. Release the rehab draws. The rehab portion, up to 100% of the budget, is released in stages against completed work. You finish a phase, submit photos and receipts, an inspector or the lender verifies the work, and funds are released. You pay for the work first and get reimbursed after. That means working capital is part of the plan, not an extra.
5. Carry the loan. Terms on the network’s program run 6 to 18 months, interest-only, with no prepayment penalty. The full balance comes due at the end.
6. Exit. You sell, or you refinance into longer-term financing. There is no multi-year option on this program. If the plan needs longer runway, the refinance is the answer.
What Leverage Does the Network Actually Offer?
On the network’s fix-and-flip program, leverage is measured against project cost and tiered by completed projects. It is 93% of project cost at five or more completed projects, 90% at two or more, and 85% with fewer than two. Every tier is capped at 75% of ARV. Terms vary by lender, property, and experience.
Two ceilings apply at once, and the lower one wins. Here is a modeled illustration with no dollar figures. Say an investor with two completed projects buys a property where the purchase price plus the rehab budget is a high share of the expected ARV. The cost-based tier would allow 90% of that total. But 90% of cost could land above 75% of ARV. When it does, the ARV cap binds, the loan shrinks, and the investor brings more cash. The tighter your project cost sits against the ARV, the more the cap matters.
Other parameters from the network:
- Bridge purchases without rehab: up to 80% of purchase price.
- Cash-out and rate-and-term refinance: up to 65% of value.
- Ground-up construction: up to 90% of cost and 75% of completed value at three or more completed projects.
- Loan size: up to $5,000,000, with larger amounts by exception.
- Collateral: non-owner-occupied residential, one to four units, with ground-up construction up to ten units.
No program funds 100% of the purchase. The 100% figure applies to the rehab budget, released in draws. A first-time investor should plan on the 85% tier and on cash for the gap.
What Does a Flip Loan Really Cost?
The cost of a hard money loan is more than its interest. Origination fees, draw inspection fees, closing costs, and extension fees all come out of the same profit pool. On a short hold, the fees often outweigh the interest.
That matters because the profit pool has been shrinking. ATTOM’s most recent quarterly report put the typical gross flip margin at 21.5%, down from 25.7% the prior quarter and 27.6% a year earlier. Typical gross profit was $60,526, with 77,991 flips making up 6.2% of home sales.
Those figures are gross. As Wrenews’ summary of the report explains, ATTOM’s gross profit is resale price minus purchase price. It does not subtract rehab, financing, taxes, insurance, transaction costs, or carrying costs. Experienced flippers estimate those costs at 20% to 33% of after-repair value. Financing sits inside that stack. A 21.5% gross margin leaves little room if the financing costs run high or the project runs long.
Price tier matters too. Financing cost relative to price bites hardest at the bottom of the market.
What Happens in a Base Case, a Delay, and a Lower Sale?
A flip should be stress-tested against three cases before you sign: the plan works, the plan runs long, and the plan sells low. A deal that only clears in the first case is not a reviewable plan. It is a hope.
This table is a modeled illustration with no dollar figures.
| Case | What changes | Effect on profit |
|---|---|---|
| Base | Sells at ARV on schedule | Plan margin holds |
| Delayed | Extra interest-only months, maybe an extension fee | Margin shrinks each month |
| Lower sale | Sells below ARV | Margin shrinks, and the loan payoff gets tighter |
| Both | Late and low | The margin may disappear |
A flip with a wide cushion survives the third and fourth rows. A flip with a thin cushion does not. The delay case deserves attention because rehab schedules slip more often than purchase prices fall. The loan term runs 6 to 18 months, so pick the term with the buffer in mind, not the base-case schedule.
Is This Deal a Go or a No-Go?
A deal passes when five checks hold at once: margin cushion, timeline buffer, rehab scope confidence, a planned exit, and cash reserves. Failing one is a reason to renegotiate or walk.
- Margin cushion: the profit still clears if the sale price comes in below the plan and the hold runs long.
- Timeline buffer: the loan term covers the scope with room to spare, not just the best-case schedule.
- Scope confidence: the rehab budget comes from contractor bids, not a rough guess, and includes a contingency.
- Exit plan: you know whether you will sell or refinance, and what has to be true for each. Decide this before closing, not at maturity.
- Cash beyond the down payment: you have money for closing costs, carrying costs, and the gap before each draw is reimbursed.
Add one lender check. Ask how draws are inspected, how long reimbursement runs, and what the loan does at maturity. The fastest purchase funding in the world does not help if each draw sits waiting.
How Does Hard Money Compare With the Other Ways to Fund a Flip?
Hard money costs more than your own cash and less than giving away a share of the profit. The right choice depends on how much cash you have and how many deals you want to run at once.
| Option | Cost to you | Rehab funding | Main risk |
|---|---|---|---|
| Hard money | Fees and interest on a short loan | Draws against work | Short maturity |
| Your own cash | No financing cost | You pay as you go | Capital tied up in one deal |
| Profit-split partner | Share of the profit | Partner supplies cash | Gives up upside |
| DSCR loan | Long-term financing cost | Not part of the loan | Wrong tool for a gut rehab |
Some investors argue that borrowing, expensive as it is, usually beats handing a partner a share of the profit. The trade-off is that borrowing may require more of your own cash. Lendmire’s piece HELOC vs Hard Money for a Flip: Which Wins at Different Deal Sizes goes deeper on that choice.
What If the Flip Doesn’t Sell?
If a flip stalls, you have three paths: extend the loan, sell at a reduced price, or refinance. Each has a cost, and each is easier to choose before the loan is in trouble than at maturity.
Extensions exist but cost money. A loan that matures unpaid risks default interest and penalties, and the property is the collateral. Selling at a reduced price protects the payoff but shrinks the profit. Refinancing works only if the property is in condition to be financed as a rental and the numbers support it.
The refinance path is where the DSCR loan comes in. Many investors refinance out of hard money into long-term DSCR financing once the property is rented and stabilized, and Lendmire brokers that path. Most programs in the network want a lease in place and a property that is rent-ready. They also commonly look for about six months of ownership before a cash-out. Cash-out refinances on standard rentals typically top out around 75% loan-to-value, subject to lender guidelines.
One caution. DSCR compares monthly rent to the full monthly housing obligation: principal, interest, taxes, insurance, and any HOA dues. A ratio above 1.00 does not mean positive cash flow. Repairs, vacancy, management, utilities, and capital expenses sit outside the calculation. For the full picture of how these loans work, see the complete DSCR loans guide.
First-Time Flippers vs. Repeat Flippers
First-time flippers can use hard money, but at lower leverage. Experience buys leverage, not approval.
On the network’s program, fewer than two completed projects puts you in the 85% of project cost tier, with the 75% ARV cap on top. Two or more completed projects moves you to 90%. Five or more reaches 93%. The top tier is reserved for experienced investors. A first-time investor should assume a larger cash requirement and a smaller margin for error, and should keep rehab scope modest on the first project.
A common mistake is treating leverage as the goal. The goal is a profitable flip. More leverage at the same margin means more fixed cost relative to your own cash, and less room for a delay.
What Should You Watch for in a Lender and Its Loan Documents?
Read the fee schedule, the draw language, and the maturity terms before you sign. The loan that looks more affordable on a term sheet is often the one with the vaguest draw process.
- A fee schedule that does not list every charge in one place.
- Draw language that gives the lender wide discretion over timing and inspection.
- Extension terms that are not stated up front.
- A prepayment penalty on a loan you plan to pay off early. The network’s program carries none.
- A maturity date that leaves no buffer past your realistic schedule.
Questions to ask any lender: which areas does it not lend in, what reserves does it require, how are draws verified, and what does it do at maturity?
Why Is This a Business-Purpose Loan?
DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. The same is true of a flip loan. The CFPB’s Regulation Z scope rule generally exempts credit extended primarily for a business purpose, and it addresses how rental property is treated. Whether a given loan is reviewed is decided case by case.
Key Terms Defined
After-repair value (ARV): the estimated market value of the property once the planned work is done.
Loan-to-cost: the loan amount as a share of the purchase price plus the rehab budget.
Draw: a release of rehab funds after a phase of work is finished and verified.
Interest-only term: a loan period where you pay interest and owe the full principal at the end.
Seasoning: the minimum time you must own a property before a cash-out refinance is available.
DSCR: debt service coverage ratio, monthly rent divided by the full monthly housing obligation.
Frequently Asked Questions
Can a beginner use a hard money loan for a first flip?
Yes, at lower leverage. On the network’s program, investors with fewer than two completed projects land in the 85% of project cost tier, always capped at 75% of ARV. Plan on bringing cash for the gap, closing costs, and the stretch between paying contractors and getting each draw reimbursed.
Does credit matter if the loan is based on the property?
It does. The minimum score on the network’s program is 620, with additional conditions below 660. Underwriting stays asset-based, so the property, the plan, and the exit carry most of the weight. A stronger score does not replace a sound ARV or a realistic rehab budget.
Can a hard money loan cover the rehab costs?
Yes, in draws. Up to 100% of the rehab budget can be funded against completed work. That is a rehab-budget figure, not a purchase loan-to-value. The purchase itself is funded at the tiered loan-to-cost, so no program covers 100% of both.
Can a DSCR loan fund a flip?
Generally no. A DSCR loan underwrites an income-producing property that is rent-ready, and rehab funding is not part of it. A flip is a project, so it needs project financing. If the flip becomes a rental, a DSCR refinance can be the next step, subject to lender guidelines.
What if I cannot sell before the term ends?
You can extend, sell at a reduced price, or refinance. Extensions cost money, and an unpaid maturity risks default interest and penalties. Decide the fallback before closing. A rent-ready property may refinance into long-term financing, and a flip with a wide margin can absorb a lower sale price.
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 financing as a broker through select lenders in its wholesale network, across 41 markets, including Washington, D.C. Request a quote through Lendmire’s quote page or call 828-256-2183.
About Lendmire
As a DSCR and non-QM mortgage broker, Lendmire — NMLS# 2371349 — connects investors with wholesale lending channels across 41 markets, including Washington, D.C. The property’s rental income, not the borrower’s tax returns, is central to lender review, which works for self-employed operators and portfolios beyond four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 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. HousingWire coverage of ATTOM flipping data
2. attomdata.com: Home Flipping Profits Continue Gradual Two Year Decline
4. CFPB Regulation Z scope rule
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 Insure a Lake House Short-Term Rental for a DSCR Loan · Hard Money Loan Requirements to Exit Seller Financing or Subject-to · How a Lender Reads a Seller-Carried Note on a Hard Money Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.