Here’s a question I hear constantly: “Where do I get the money to flip?”
The better question: what is this money going to cost me if the project goes long?
Because every flip funding source has a price. Sometimes it’s interest and fees. Sometimes it’s a share of the upside. Sometimes it’s control. And sometimes it’s the house your kids sleep in. If you don’t know the full price before you start, you’re not financing a flip. You’re gambling with someone’s money — maybe your own.
I’m Ben Lovro, a Lexington-based investor, and over the years I’ve used most of the structures on this page at one time or another. I’m not a lender and I’m not giving financial advice. I’m walking you through how an operator thinks about the trade-offs.
First principle: capital chases deal flow
Before options, a truth. Money is rarely the real bottleneck. Good deals are. Lenders and partners show up for investors who consistently find and underwrite deals well. If you can bring a deal with a provable ARV, a real scope and a clear exit, financing gets a lot easier.
So master the deal side first. Learn the underwriting sequence at analyze a real estate deal.
Option 1: your own cash
How it works: you buy and renovate with your own money.
Pros: - Fastest closings and strongest negotiating position with sellers. - No lender fees, no draw inspections, no loan approval. - You keep all of the upside.
Cons: - All of the risk is yours. - Your cash is tied up for the whole project — it can’t fund the next deal. - Cash isn’t free. It has an opportunity cost.
When it fits: you have reserves beyond what the flip needs, so a surprise doesn’t put your household under stress.
Option 2: hard money
How it works: a short-term loan from a lender that focuses heavily on the property and the deal. Purchase money and often renovation money, with rehab funds released in draws after inspections.
Pros: - Built for flips, so the process fits the project. - Draws create discipline — work gets verified before money goes out. - Lets you do a deal you couldn’t fund alone.
Cons: - Usually one of the more expensive sources of money, with points and fees on top of interest. - Short terms. If the project runs long, extension costs can stack up. - You’ll typically need cash for the down payment, closing costs and possibly the first draw.
Questions to ask any hard money lender:
- How do you calculate the loan amount — on purchase price, ARV, or both?
- What are all the fees, start to finish, including extension and exit fees?
- How does the draw process work, and how fast are inspections and payouts?
- What happens if I need more time?
- Is there a prepayment penalty?
- Can I talk to a few investors who’ve borrowed from you?
There’s more on this on the hard money loans page.
Option 3: private money
How it works: you borrow from an individual — someone in your network with capital — secured by the property through a promissory note and a mortgage or deed of trust, drafted by an attorney.
Pros: - Terms can be more flexible because they’re negotiated person to person. - Relationship-based, so a track record of doing what you said matters.
Cons: - You’re borrowing from people you know. If the deal goes bad, the relationship carries the weight. - It must be documented properly, and raising money from multiple people or pooling it can raise securities law issues. Get counsel.
I treat private lenders like family money, because often it’s close to it. I explain how I think about those relationships on private money lenders. If you’re on the other side — curious how a careful private lender protects themselves — the lending education site is written for you.
Option 4: a partner
How it works: one person brings the money, the other brings the deal and the work — or some mix. You split the outcome according to a written agreement.
Pros: - Can pair a capital partner with an operator, which covers both weaknesses. - Shared risk, shared learning.
Cons: - You give up part of the upside and part of the control. - Bad partnerships end friendships. Most of them die from unclear expectations.
My rule: put the roles on paper first. Spell out who brings the deal, who brings the money, who runs the project, who has final say, who signs, what happens if it goes long, what happens if it loses money, and how disagreements are settled. An attorney drafts it. More on joint ventures and on the JV site.
Option 5: a HELOC or home equity
How it works: you borrow against the equity in your own home and use it to buy or renovate the flip.
Pros: - Often simpler to access than other options. - Flexible draw as you need it.
Cons: - Your home is the collateral. If the flip fails, you still owe it. - It can feel like “your money,” which makes people careless with it.
I’ll be honest: my family comes first, and that shapes how I think about this one. If you use your home to fund a flip, you’d better have a margin, a contingency and an exit B that let you sleep at night. Talk it through with your spouse and a financial professional before you sign anything.
Other paths people use
You’ll also hear about stacking sources — say, hard money on the purchase and rehab with a partner covering the down payment — or seller financing on the purchase itself. These can work, and they can also stack risk in ways that are hard to see. Every layer of financing adds a payment, a deadline and a party with rights. Creative structures are covered on the creative financing site, with an attorney caveat on every page.
How to compare your options
Don’t compare rates. Compare total cost at a realistic timeline.
- Estimate the project length honestly — then add some time.
- For each option, list every cost: interest, points, origination, draw fees, inspection fees, extension fees, legal fees, and any profit share.
- Calculate the total cost at your realistic timeline and at a longer one.
- Plug those into your deal analysis and see which deals still work.
If a deal only works with the cheapest money at the shortest timeline, it doesn’t work. That’s why the 70% rule leaves room for financing — see the 70 percent rule page.
Line it up before you’re under contract
The worst time to look for money is after you’ve signed a purchase agreement with a closing date. Do the work now:
- Talk to a few lenders and understand their process before you need them.
- Know your down payment, closing cost and reserve requirements.
- Have your entity, insurance and documentation ready.
- Know how renovation draws will flow so your contractor isn’t waiting.
Your next step
Pick one funding option from this page and interview two providers this week. Use the questions above. Write down every cost. Then run a sample flip through your analysis at a realistic timeline and a slow one. If you want help pressure-testing it, bring it to REI Skool — that’s what the room is for. For the bigger flipping sequence, start at the flipping houses guide.
Questions people ask
What are fix and flip loans?
They’re short-term loans designed for buying and renovating a property for resale. Many are offered by hard money lenders and are based heavily on the property and the deal, with renovation money released in draws as work is completed. Terms vary widely, so compare the full cost and read every document.
Can I use hard money for my first flip?
Some hard money lenders work with first-time flippers, often with more scrutiny or a partner with experience. The bigger question is whether your deal has enough room to absorb the cost of that money if the project runs long. Run the numbers at a realistic timeline, not a best case.
Is it smart to use a HELOC to flip a house?
It can work, but it puts your home on the line. If the flip goes badly, you still owe the line of credit. I’d only consider it with a deal that has a wide margin, a clear exit B, and a conversation with your spouse and a financial professional first.