The Quick Read: Yes, you can put a solid number on the monthly carry of a hard money flip with a simple formula: add interest on the outstanding balance to property taxes, insurance, utilities, and any dues or upkeep, then multiply by the months you expect to hold. Two inputs decide how accurate you are: how the lender charges interest on the rehab money, and how long the project really runs.
- Interest is usually the biggest line, and hard money flip loans are typically interest-only.
- Property taxes, insurance, and utilities are smaller but real, and you can price them from actual bills and quotes.
- Whether interest accrues on the full commitment or only on drawn funds is the largest swing in the estimate.
- The national average flip runs about five and a half months, which is a sanity check, not a plan.
- Build a buffer of extra months, because the loan clock and the carry clock both keep running when the project slips.
What Is the Formula?
The formula has two steps. First, add every monthly cost of owning the property while you work on it. Second, multiply that monthly total by the number of months you expect to hold.
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.
Monthly carry = interest on the balance + property taxes ÷ 12 + insurance + utilities + dues, lawn care, security, or upkeep.
Total carry = monthly carry × months held.
Time is the multiplier, so a small error in the schedule hurts more than a small error in any single bill. Interest accrues every month whether or not a contractor shows up. An extra month adds a full month of every line, not just the largest one.
Keep the loan-versus-property split clear in your head. Some investor guides leave financing out of holding costs to avoid double-counting it elsewhere in the deal analysis. That is a fine convention if you count interest somewhere else. For a hard money flip, count it. The interest bill is the one cost no flip avoids, so a budget without it is not a budget.
Key Terms Defined
Holding costs (carry): everything you pay each month to own the property before you sell it or refinance it.
Interest-only: a payment structure where you pay interest on the balance each month and the principal comes due at sale, payoff, or maturity.
Rehab holdback: the part of the loan reserved for renovation work, released to you in stages instead of at closing.
Draw: one release of holdback money, usually after a lender inspection confirms the work is done.
After-repair value (ARV): what the property should be worth when the renovation is finished.
Loan-to-cost: the loan amount as a share of total project cost (purchase plus rehab), rather than a share of current value.
Extension fee: a charge for extra time when the project runs past the loan’s maturity date.
How Interest Works on a Flip Loan
Interest on a flip loan is calculated on the balance, month by month. The formula is balance × annual interest percentage ÷ 12. This article leaves the percentage as a placeholder because pricing is quoted per file and changes constantly. Plug in your own quote when you have one.
The question that matters is which balance. A typical hard money structure funds the purchase at closing and holds the rehab money back for draws against completed work. Programs we see across the wholesale network commonly describe terms of 6 to 18 months, interest-only, with no prepayment penalty. These details vary by lender, property, and experience.
Because there is typically no prepayment penalty, finishing early stops the interest. A twelve-month loan does not automatically mean twelve months of interest. It means you have up to twelve months to finish.
Here is where estimates go wrong. Some lenders charge interest only on funds that have actually been disbursed. Others charge on the full commitment from day one, including holdback money you have not touched. Ask the lender which method applies, and ask in writing.
Run it two ways:
1. Conservative case: the full loan balance outstanding from the first day.
2. Ramp case: the purchase balance from day one, plus rehab money added as draws are released.
Picture rehab money released evenly across the hold. Under drawn-only interest, the average balance is the purchase portion plus roughly half the holdback. Under full-commitment interest, you pay on the whole holdback every month. On a project with a large rehab budget, that gap is meaningful. On a light cosmetic project, it is small.
Daily carry is also useful to know. Divide the monthly interest figure by about 30, and you see what every extra day costs. That number makes a stalled inspection feel real.
Which Costs Belong in the Monthly Number?
Interest gets the attention, but five other lines sit beside it. The table shows how to price each one and where to verify it. Replace any rule of thumb with the real document as soon as you have it.
| Cost line | How to calculate | Where to verify | Fixed or variable |
|---|---|---|---|
| Loan interest | Balance × annual % ÷ 12 | Loan term sheet | Variable with draws |
| Property taxes | Annual bill ÷ 12 | County tax record | Fixed |
| Insurance | Quoted premium ÷ 12 | Vacant or builder’s-risk quote | Fixed |
| Utilities | Monthly average, adjusted by season | Prior bills, utility call | Variable |
| HOA dues | Monthly dues | Association statement | Fixed |
| Lawn, security, upkeep | Monthly service cost | Vendor quote | Variable |
Insurance deserves its own call. A property under renovation or sitting vacant often needs a different policy than an occupied home, so get a quote for the actual situation before you close.
One investor-education source, FlipperForce, offers a non-financing carry heuristic and suggests assuming a four-to-six-month hold when you are unsure. Treat that as one site’s rule of thumb. Taxes, dues, and utilities vary widely by property, county, and season, so your own bills beat any heuristic.
Two transaction-linked costs sit outside the monthly figure but belong in your all-in estimate. Draw and inspection fees accrue each time you pull funds. Some lenders also hold back an interest reserve. Ask whether either applies, and add them as separate lines so they do not hide inside a monthly average.
How Long Will You Actually Hold?
Start with data, then adjust for your project. ATTOM reports that the average flip took 163 days from purchase to resale, about 5.4 months. A later ATTOM quarterly report put the figure at 165 days, up from 160 the prior quarter.
Keep two cautions in mind. ATTOM measures deed to deed, so the number covers everything from the purchase recording to the resale recording. It is also a national middle. Your project can sit well above or below it.
Build your own schedule in phases instead of picking a single number:
- Acquisition and setup: closing, insurance, utilities, and permits.
- Rehab: the actual work, plus the gaps between trades.
- Draw cycle: inspections and reimbursements that can stretch the work.
- Listing and sale: marketing, offers, buyer financing, and closing on the sale.
Light cosmetic projects tend to land near the short end. Heavy rehabs and first-time flippers often run much longer than they plan. If your phase-by-phase schedule comes in below the national average, ask yourself why. Then add contingency months anyway.
Don’t forget the selling side. The carry does not stop when the work is done. It runs through the listing period and the buyer’s closing.
Worked Example: One Property, Three Timelines
Run the numbers this way. These are modeled assumptions, not market data: hold the monthly carry flat and change only the number of months.
| Scenario | Months held | Total carry vs. plan |
|---|---|---|
| On plan | 5 | 1.0x |
| Delayed | 7 | 1.4x |
| Badly delayed | 9 | 1.8x |
That is the whole lesson. A four-month slip nearly doubles the carry, even though no single bill changed. The table also understates the damage, because it leaves out extension fees, draw fees, and any listing-period costs that stack on top.
Now layer in the interest-accrual question. If your lender charges on the full commitment, the monthly figure in every row is higher from the start. If it charges on drawn funds only, early months are lighter and later months catch up as draws are released. In both cases, the right habit is the same: model the conservative case, then see how much room the deal has left.
What Happens If You Run Past Maturity?
Extensions are where an optimistic budget turns into a bad one. If the project runs past the loan’s maturity date, extension fees are typically quoted as a percentage of the outstanding balance. Those terms are not standardized, so read the note before you sign and ask what the extension costs and how many times you can use it.
The extension fee is only part of the cost. Taxes, insurance, utilities, and interest keep running the whole time. Add up the monthly carry for each extra month, then add the fee. Practitioner commentary suggests the true cost of running late can be roughly double the fee itself, so a fee that looks small on paper can understate the damage.
Test your deal against that case before you close. If the numbers only work when the project finishes on schedule, the deal is thin.
Mistakes That Skew the Estimate
- Counting only the loan payment. Taxes, insurance, utilities, dues, and upkeep sit on top of interest.
- Assuming interest applies only to money spent. Some lenders charge on the full commitment.
- Assuming a full-term loan means full-term interest. With no prepayment penalty, interest typically stops at payoff.
- Treating the quoted percentage as the whole cost. Points, draw fees, inspection fees, and extension fees stack on top.
- Copying the national timeline. A deed-to-deed average is a benchmark, not a schedule.
- Treating a one- or two-month slip as trivial. That depends heavily on loan size, because interest scales with the balance.
Why This Matters for Profit
Flip margins are not generous. ATTOM’s year-end report shows a typical gross flip ROI of 25.5%, the lowest since 2008. The Mecklenburg Times summary of that report puts typical gross profit at $65,981.
Gross profit is not what you keep. ATTOM’s methodology note says gross profit excludes rehab and other expenses, which experienced flippers estimate at 20% to 33% of after-repair value. Holding costs live inside that bucket. When margins are that thin, one extra month of carry can matter more than a small difference in pricing.
Where Leverage and Structure Fit
Carry is easier to manage when you know how the loan is built. Across the wholesale network, fix-and-flip leverage is measured against project cost, tiered by documented completed projects: typically 85% of project cost for newer investors, 90% at two or more completed projects, and 93% at five or more. Every tier is capped at 75% of after-repair value. Up to 100% of the rehab budget funds in draws against completed work. All of this varies by lender, property, and experience, and nothing here is a commitment to lend.
Higher leverage means a larger balance, and a larger balance means more monthly interest. The extra cash you keep at closing is not free money. It shows up as carry. Experienced investors at the top tier should pay particular attention to the conservative-case interest model.
These loans are business-purpose financing for non-owner-occupied residential property. They are reviewed on the property, the plan, and the exit, which is why the exit belongs in your carry budget too.
Budget the Exit Before You Close
Your holding-cost estimate is only half the exit picture. The payoff on the hard money loan must cover drawn principal, accrued interest, any points and draw fees, and any extension fees. Keep enough cushion that the payoff number does not surprise you.
Many investors who plan to keep the property refinance out of hard money into long-term DSCR investor loans once the property is stabilized. A DSCR cash-out refinance on a standard rental typically tops out around 75% of value, with about six months of seasoning common across the network. Terms vary by lender and property.
One warning: do not apply flip-loan carry math to a DSCR rental loan. A hard money flip loan is short-term and interest-only. A DSCR loan is long-term rental financing, with qualification built primarily on property-level rental income covering the payment, subject to lender guidelines. The complete DSCR loans guide explains how that side works. Clearing the coverage test also does not mean the property cash flows, since repairs, vacancy, and management sit outside the calculation.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Pre-Closing Estimation Checklist
1. Get the loan terms in writing, including how interest accrues on undrawn rehab money.
2. Pull the annual property tax bill from the county record and divide by 12.
3. Get an insurance quote for a vacant or under-renovation property.
4. Ask each utility for a monthly average, and adjust for season.
5. Confirm HOA dues, if any, and whether they continue during the rehab.
6. Ask about draw fees, inspection fees, and any interest reserve.
7. Build a phase-by-phase schedule, then compare it to the national average.
8. Run three timelines: on plan, delayed, and badly delayed.
9. Read the extension terms and add the cost to your worst case.
10. Confirm the payoff covers principal, interest, fees, and your exit plan.
Frequently Asked Questions
Do holding costs include loan interest?
On a hard money flip, yes, count it. Some guides exclude financing to avoid double-counting, but interest is the largest monthly cost on most flips. Include it in carry, or track it as a separate line, but never leave it out of the deal.
Do rehab costs count as holding costs?
No. Rehab is a project cost, not a carry cost. Holding costs are what you pay each month to own the property while you work. Interest on the rehab money does count, because it accrues monthly.
How many months should I assume?
Start with your phase-by-phase schedule. Check it against the national average of about five and a half months, and add contingency months. First-time flippers and heavy rehabs often run longer. One investor-education source suggests four to six months when you are unsure.
What if my flip takes longer than the loan term?
You will likely face an extension fee, typically quoted as a percentage of the outstanding balance, and carry keeps accruing during the extension. Terms are not standardized, so read the note before closing and test your worst case.
Is a flip different from a rental for holding costs?
Yes. A flip carries interest-only debt for a short period with no tenant income. A rental has tenant income and long-term financing with a different payment structure. Use flip carry math for the hold, and rental coverage math for the refinance.
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. As a broker, Lendmire arranges financing through select lenders across 41 markets, including Washington, D.C. Investors can reach the team at 828-256-2183.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage focused on DSCR investor financing, helping arrange programs through wholesale and investor-lending channels in 41 markets, including Washington, D.C. DSCR loans are evaluated by the lender on property cash flow rather than personal income, subject to lender guidelines, supporting LLC closings and accommodating investors with four or more financed properties. Scotsman Guide Top Mortgage Workplace in both 2025 and 2026.
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References
1. FlipperForce: Calculating Holding Costs
2. ATTOM
3. attomdata.com: Q1 Home Flipping Report
4. Mecklenburg Times summary of ATTOM data
5. Home Flipping Profits Lowest Since 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: Can an Investor Find a Hard Money Lender for a Fix and Flip? · Can You Roll Closing Costs Into Hard Money on a Flip? · Can You Get a Hard Money Loan Without Owning a Business?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.