Contents
How to Finance Rehab Projects - From Hard Money to DSCR Exit StrategiesHow Fix and Flip Financing WorksTypes of Fix and Flip FinancingThe Numbers: How to Underwrite a FlipA Complete Flip Underwrite With Real NumbersThe Draw ProcessChoosing the Right FinancingThe Exit Decision: Sell vs. RefinanceCommon MistakesGetting StartedComplete Guide
How Fix and Flip Financing Works: The Complete Guide (2026)
How to Finance Rehab Projects - From Hard Money to DSCR Exit Strategies
Published by Pinnacle Funding Network | Updated July 2026
The short answer: fix and flip loans are short-term, interest-only loans that fund both the purchase and the rehab, sized against two caps: up to 90 percent of cost (LTC) with 100 percent of the rehab financed, and roughly 70 to 75 percent of the after-repair value (ARV). Through Pinnacle Funding Network, fix and flip rates start at 8 percent (as of June 2026), standard closings run 14 to 21 days with expedited files in 7 to 10, and the exit is either the sale or a refinance into a 30-year DSCR loan.
Flipping houses isn't a get-rich-quick scheme. It's a capital-intensive business where your financing structure determines whether you make money, break even, or lose your shirt.
Most flippers focus on finding deals. Smart flippers focus on structuring deals - and financing is the structure. This guide covers every financing option available for fix-and-flip projects in 2026, how to choose between them, and how to build a financing strategy that scales.
How Fix and Flip Financing Works
Fix and flip loans are short-term loans designed for investors who buy properties, renovate them, and sell them within 6-18 months. They're fundamentally different from long-term mortgages.
Key differences from buy-and-hold financing:
- Term: 12-24 months (not 30 years)
- Payment structure: Interest-only (no principal paydown)
- Funding: Purchase price + rehab budget (drawn in stages). See our fix and flip budget template for planning
- Exit strategy: Sale of the renovated property (not rental income)
- Speed: Can close in 7-10 days
The lender's primary question isn't "can the borrower afford this payment for 30 years?" It's "will this project create enough value that the borrower can repay the loan from the sale proceeds?"
| Factor | Fix and flip | Buy and hold |
|---|---|---|
| Term | 12 to 24 months | 30 years |
| Payment structure | Interest-only, no principal paydown | Amortizing, or interest-only on some programs |
| What is funded | Purchase price plus the rehab budget, released in stages | Purchase price, in one wire at closing |
| How it gets repaid | Sale of the renovated property, or a refinance | Rental income over the life of the loan |
| Speed | As few as 7 days | 20 to 30 days |
| The lender's question | Will this project create enough value to repay the loan from proceeds | Does the property's rent cover its own payment |
Types of Fix and Flip Financing
Hard Money Loans
Hard money is the traditional fix-and-flip financing vehicle. These are short-term, asset-based loans from private lenders. For a deeper comparison, read Hard Money vs. DSCR Loans.
| Feature | Typical Range |
|---|---|
| Interest Rate | 10% - 14% |
| LTC (Purchase) | 70% - 85% |
| LTC (Rehab) | 70% - 100% |
| LTARV | 65% - 70% |
| Term | 6 - 18 months |
| Points | 2 - 4 |
| Closing Speed | 3 - 10 days |
| Credit Requirement | 580+ (some have no minimum) |
Best for: Speed-critical deals, borrowers with lower credit, first-time flippers, situations where a conventional or bridge lender would take too long.
Watch out for: High points (origination fees), aggressive rate structures, draw inspection costs, extension fees if the project runs over timeline.
Fix and Flip Bridge Loans
These sit between hard money and conventional - longer terms, lower rates, and more structured draw processes.
| Feature | Typical Range |
|---|---|
| Interest Rate | 8% - 11% |
| LTC (Purchase) | 85% - 90% |
| LTC (Rehab) | 90% - 100% |
| LTARV | 70% - 75% |
| Term | 12 - 24 months |
| Points | 1 - 3 |
| Closing Speed | 7-10 days |
| Credit Requirement | 640+ |
Best for: Experienced flippers doing 3+ deals per year, larger projects ($200K+ rehab budgets), investors who want more leverage and lower costs.
The DSCR Exit Strategy
Here's what separates good flippers from great ones: the exit strategy.
Most flippers plan to sell. But the smartest flippers keep the option to hold. If the market shifts, if a property rents for more than expected, or if you simply want to build a portfolio - you refinance the flip into a long-term DSCR loan.
The BRRRR Method:
- Buy the property with a fix-and-flip loan
- Rehab using the draw schedule
- Rent the property to a qualified tenant
- Refinance into a DSCR loan (based on the new appraised value and rental income)
- Repeat - use the cash pulled out to fund the next deal
This strategy lets you have it both ways: flip if the sale price is right, hold if the rental numbers work. Having a lending partner who does both fix-and-flip and DSCR makes that pivot seamless.
The Numbers: How to Underwrite a Flip
Before you apply for financing, run the numbers yourself. Here's the framework:
The Deal Economics
PURCHASE:
Purchase Price: $[amount]
Closing Costs (buy, ~2-3%): $[amount]
REHAB:
Renovation Budget: $[amount]
Contingency (10-15%): $[amount]
Total Rehab: $[amount]
HOLDING COSTS (Monthly × Hold Time):
Loan Interest: $[amount]
Property Taxes: $[amount]
Insurance: $[amount]
Utilities: $[amount]
Total Holding: $[amount]
TOTAL PROJECT COST: $[sum of all above]
EXIT:
After Repair Value (ARV): $[amount]
Selling Costs (~6%): -$[amount]
Loan Payoff: -$[amount]
Net Proceeds: $[amount]
PROFIT: $[Net Proceeds - Cash Invested]
ROI: Profit ÷ Cash Invested × 100
The 70% Rule (And Why It's a Starting Point)
The classic rule: never pay more than 70% of ARV minus repair costs. For more on these metrics, read LTV, LTC, and ARV Explained.
Maximum Purchase Price = (ARV × 0.70) - Rehab Costs
Example: ARV of $400,000, rehab of $60,000
Max purchase = ($400,000 × 0.70) - $60,000 = $220,000
This rule provides a margin of safety, but it's a guideline, not gospel. In competitive markets, experienced flippers adjust to 73-75% and make it work through faster timelines and tighter rehab management. In risky markets or with inexperienced crews, you might want 65%.
Cash-in-Deal Analysis
Understanding how much cash you need is crucial:
YOUR CASH IN:
Down Payment (purchase): $[purchase price × (1 - LTC%)]
Down Payment (rehab): $[rehab budget × (1 - rehab LTC%)]
Closing Costs: $[amount]
Upfront Points: $[amount]
Reserves Required: $[amount]
TOTAL CASH NEEDED: $[sum]
With 90% purchase LTC and 100% rehab financing on a $200K purchase with $60K rehab:
- Purchase down: $200K × 10% = $20K
- Rehab down: $0 (100% financed)
- Closing costs: ~$6K
- Points (2%): ~$5.2K
- Total cash needed: ~$31K
That $31K controls a $260K project. Leverage is the game.
A Complete Flip Underwrite With Real Numbers
The framework above is where every deal starts. Here it is filled in, using the same property as the 70 percent rule example: ARV $400,000, rehab $60,000, purchased at $220,000.
The structure: 90 percent LTC on the purchase and 100 percent of the rehab financed, at an illustrative 8 percent interest-only (2026 fix and flip rates start at 8 percent; each file prices to experience, leverage, and project profile), with a 6-month hold.
| Sources and Uses | Amount |
|---|---|
| Purchase price | $220,000 |
| Lender funds at 90% LTC | $198,000 |
| Rehab holdback (100% financed, drawn in stages) | $60,000 |
| Total loan commitment | $258,000 |
| Down payment (your cash) | $22,000 |
| Closing costs | $6,000 |
| Points (2%) | $5,160 |
| Carry and Exit (6-month hold) | Amount |
|---|---|
| Interest (interest-only on the drawn balance, ramping from $1,320/mo to $1,720/mo as draws fund) | $9,120 |
| Taxes, insurance, utilities ($650/mo) | $3,900 |
| Total cash invested | $46,180 |
| Sale price (ARV) | $400,000 |
| Selling costs (6%) | -$24,000 |
| Loan payoff | -$258,000 |
| Profit | $71,820 |
That is roughly a 155 percent return on the $46,180 of cash in the deal, in six months, at full leverage. Every line above moves: hold two extra months and the carry eats about $4,000 of profit; miss the rehab budget by 15 percent without a contingency and it eats $9,000 more. The financing structure is not paperwork around the deal. It is the deal.
The Draw Process
Rehab funds aren't disbursed all at once. They're released in draws as work is completed.
How Draws Work
- You complete a phase of renovation (demo, framing, plumbing, electrical, finishes, etc.)
- You submit a draw request to the lender with photos and invoices
- The lender reviews the documentation and verifies the work is complete
- Once approved, funds are released (typically within 3-5 business days)
Draw Tips
- Budget by phase. Break your scope of work into clear phases that align with draw milestones.
- Front-load cash needs. You'll often need to pay contractors before the draw comes through. Keep reserves for the gap.
- Document everything. Before/after photos for every draw request. This speeds up the inspection.
- Know the review cost. Some lenders charge $100-200 per draw review. Factor this into your budget.
- Avoid change orders. Scope creep kills flip margins. Get a thorough inspection before you buy and build a realistic budget before you start.
| Step | What you do | What the lender does |
|---|---|---|
| 1 | Complete a phase of the renovation: demo, framing, plumbing, electrical, finishes | Nothing yet. The work has to exist first |
| 2 | Submit a draw request with photographs and invoices | Receives the package |
| 3 | Answer any questions on the documentation | Reviews and verifies the work is genuinely complete |
| 4 | Pay contractors from the released funds | Releases funds, typically within 3 to 5 business days of approval |
| Practice | Why it matters |
|---|---|
| Budget by phase | Break the scope of work into clear phases that line up with draw milestones. A budget the lender cannot map to milestones slows every draw |
| Front-load your cash | You will often pay contractors before the draw arrives. Hold reserves specifically for that gap |
| Document everything | Before and after photographs on every request. It is the single cheapest way to speed up an inspection |
| Know the review cost | Some lending partners charge roughly $100 to $200 per draw review. Put it in the budget rather than discovering it |
| Avoid change orders | Scope creep is what kills flip margins. Inspect thoroughly before you buy and build a realistic budget before you start |
Choosing the Right Financing
| If You Are... | Best Option | Why |
|---|---|---|
| First-time flipper, need hand-holding | Hard money (local lender) | They'll work with less experience, close fast |
| Doing 1-2 flips/year, solid credit | Fix & flip bridge loan | Better rates and terms than hard money |
| Doing 3+ flips/year, want scale | Bridge loan with DSCR exit option | Maximum flexibility, best economics at volume |
| Flipping in a hot market, speed critical | Hard money | Fastest close, fewest conditions |
| Planning to BRRRR (flip or hold) | Fix & flip + DSCR from same lender | Seamless refinance from short-term to permanent |
| Cash-rich, rate-sensitive | Cash purchase + delayed refinance | Buy cash, rehab, then take a DSCR or conventional loan at better terms |
The Exit Decision: Sell vs. Refinance Into DSCR
Same deal, one more decision. The renovated property would rent for $3,000 a month. Now there are two honest exits, and the smartest flippers underwrite both before they buy.
| Factor | Exit A: Sell | Exit B: DSCR refinance |
|---|---|---|
| What happens | Sell at $400,000 | Refinance at 75% of the new $400,000 value = $300,000 30-year DSCR loan |
| Cash at exit | $71,820 profit | Roughly $39,000 back at closing after the $258,000 payoff and costs |
| What you keep | Nothing; the deal is done | The asset, about $100,000 of equity, and roughly $250/mo of cash flow (rent $3,000 against an illustrative PITIA near $2,750) |
| Qualifying | A buyer's problem | DSCR near 1.09x on the property's own rent; no tax returns |
| Best when | The sale market is strong and you want the capital for the next flip | The property rents well and you are building a portfolio |
Exit B is the BRRRR strategy in practice: nearly all of the cash comes back out, the asset stays, and the DSCR loan (rates starting at 5.8 percent as of June 2026) qualifies on the rent rather than your income. Having the fix and flip loan and the DSCR exit under one roof is what makes the pivot seamless; the numbers above are illustrative, and a same-day quote prices both exits on your actual deal.
Common Mistakes
Underestimating rehab costs. The #1 reason flips lose money. Budget 10-15% contingency minimum. Walk the property with your contractor before making an offer.
Overestimating ARV. Use sold comps, not active listings. Look at properties within 0.5 miles, sold within 90 days, with similar square footage and condition. Be conservative.
Ignoring holding costs. Every month you hold the property costs you money - loan interest, taxes, insurance, utilities, lawn care. A 6-month project at $3,000/month holding costs is $18,000 off your profit.
Not having an exit strategy. What if it doesn't sell in 30 days? 60 days? 90 days? Have a plan: price reduction schedule, rental analysis, refinance option.
Using the wrong lender. The cheapest rate isn't always the best deal. Speed, reliability, draw process efficiency, and flexibility matter more than saving 0.5% on rate when you're trying to close in 10 days.
| Mistake | What it looks like | The fix |
|---|---|---|
| Underestimating rehab costs | The single most common reason a flip loses money | Carry a 10 to 15% contingency minimum, and walk the property with your contractor before you make the offer |
| Overestimating after-repair value | Pricing the exit off active listings rather than sold comparables | Sold comps only, within half a mile, sold within 90 days, similar square footage and condition. Be conservative |
| Ignoring holding costs | Interest, taxes, insurance, utilities and grounds every month you own it. A six-month project at $3,000 a month is $18,000 straight off the profit | Model holding costs from day one and treat the timeline as a cost, not a schedule |
| No exit plan beyond the sale | No answer to what happens at 30, 60 or 90 days on market | Decide the price reduction schedule, the rental analysis and the refinance option before you list |
| Choosing on rate alone | The cheapest rate quoted by a lender who cannot fund on your timeline | Speed, reliability, draw efficiency and flexibility are worth more than half a point when you are trying to close in days |
Getting Started
If you have a flip deal - or are looking for one - and want to understand your financing options, request your free quote or try our deal calculator. We'll run the numbers: purchase financing, rehab draws, holding costs, and projected ROI. If the deal works, we move fast. If it doesn't, we'll tell you.
James Loffredo, Principal
Pinnacle Funding Network
214-885-4313
info@pinnaclefundingnetwork.com
pinnaclefundingnetwork.com
Pinnacle Funding Network is a correspondent lender and loan originator. PFN originates loans and funds them through its network of institutional capital partners, who make final funding decisions; PFN may sell or assign loans at or after closing. Rates, terms, and programs are subject to change. All loan applications are subject to credit review, property appraisal, and underwriting approval.