How to Finance a House Flip: 5 Funding Options Compared
Compare hard money, private money, HELOC, cash, and renovation loans for house flipping. Includes a comparison table on rates, LTV, speed, and requirements.
Financing a house flip is fundamentally different from financing a primary residence or a rental property. You need capital fast, you need it for properties in poor condition, and you need a payoff timeline measured in months rather than decades.
The right financing option depends on your experience level, available capital, timeline, and deal size. This guide compares the five most common funding sources for flips, with a detailed breakdown of costs, speed, and practical considerations for each.
Quick Comparison
| Option | Typical Rate | Points/Fees | LTV | Time to Fund | Best For |
|---|---|---|---|---|---|
| Hard money | 10-14% | 1-4 points | Up to 90% of purchase, 65-75% of ARV | 5-14 days | Experienced flippers scaling up |
| Private money | 8-12% | 0-2 points | Negotiable | 3-14 days | Relationship-based investors |
| HELOC | 7-10% (variable) | Low/none | Up to 85% of home equity | 14-30 days (pre-approved) | Homeowners with equity |
| Cash | N/A | N/A | 100% | Immediate | Investors with liquid capital |
| Conventional renovation loan | 6.5-8% | Standard closing costs | Up to 97% (owner-occupied) | 45-60 days | Owner-occupant flippers |
Option 1: Hard Money Loans
Hard money is the most common financing source for experienced flippers. These are short-term, asset-based loans funded by private lending companies.
How It Works
You apply with the deal details (purchase price, ARV, rehab scope) rather than your personal income. The lender evaluates the property, not your tax returns. Loans typically cover 80-90% of the purchase price and 100% of rehab costs (funded through draws), with a total loan-to-ARV cap of 65-75%.
Cost Structure
For a $150,000 purchase with $40,000 in rehab:
| Item | Amount |
|---|---|
| Loan amount (90% of purchase) | $135,000 |
| Rehab holdback (100%) | $40,000 |
| Total facility | $175,000 |
| Cash to close (10% of purchase + closing) | $19,500 |
| Interest rate | 12% |
| Points (2) | $3,500 |
| Monthly interest (on drawn balance, avg) | $1,400 |
| 8-month hold: total interest | $11,200 |
| Total financing cost | $14,700 |
Pros
- Fast closing (7-10 days)
- No personal income verification
- Funds rehab costs
- Property condition does not matter
Cons
- Expensive (total cost often $10K-$20K per deal)
- Short terms (6-18 months) with extension penalties
- Minimum interest clauses common
- Points are due upfront regardless of hold period
For a deeper look at rates and terms, see our guide to hard money loan rates.
Option 2: Private Money
Private money comes from individuals — friends, family, colleagues, local investors, or people you meet at real estate networking events. The terms are whatever you negotiate.
How It Works
You present a deal to a private individual and agree on rate, term, and collateral. The loan is typically secured by the property (first lien position) with a promissory note and deed of trust. Some private lenders take a percentage of profits instead of (or in addition to) interest.
Typical Terms
| Parameter | Common Range |
|---|---|
| Interest rate | 8-12% |
| Points | 0-2 |
| LTV | Negotiable (often 70-100%) |
| Term | 6-12 months |
| Funding speed | 3-14 days |
| Profit split (if applicable) | 20-50% of profit |
Cost Structure: Same $150K + $40K Rehab Deal
| Item | Amount |
|---|---|
| Loan amount | $150,000 (100% of purchase) |
| Rehab funded | $40,000 |
| Cash to close | $4,000 (closing costs only) |
| Interest rate | 10% |
| Points (1) | $1,900 |
| 8-month interest | $12,667 |
| Total financing cost | $14,567 |
Similar total cost to hard money, but with a key advantage: zero cash to close on the purchase (private lender funded 100%). Your $4,000 covers only closing costs.
Pros
- Fully negotiable terms
- Can fund 100% of purchase + rehab
- Faster than hard money (no institutional underwriting)
- No minimum interest clauses (unless you agree to one)
Cons
- Requires a network of investors
- Relationship-dependent (hard to scale)
- Less standardized (legal docs vary)
- Risk to personal relationships if a deal goes badly
Option 3: HELOC (Home Equity Line of Credit)
If you own a primary residence or other property with equity, a HELOC provides a revolving credit line you can draw against for flips.
How It Works
A lender extends a line of credit secured by your existing property (usually up to 80-85% combined LTV). You draw funds as needed and pay interest only on the drawn amount. When you sell the flip, you repay the HELOC and the credit line is available again.
Cost Structure: Same Deal, HELOC Funding
| Item | Amount |
|---|---|
| Available HELOC balance | $200,000 |
| Amount drawn for flip | $190,000 (purchase + rehab) |
| Interest rate (variable) | 8.5% |
| 8-month interest | $10,767 |
| Origination fee | $0 (if pre-existing HELOC) |
| Total financing cost | $10,767 |
Pros
- Lower rates than hard money (typically 7-10%)
- No points or origination on subsequent draws
- Revolving — pay it back, draw again for next flip
- Interest only on drawn balance
- No property condition requirements (secured by your home, not the flip)
Cons
- Requires significant home equity
- Your primary residence is at risk
- Variable rates can increase mid-project
- Initial setup takes 2-4 weeks
- Lender may reduce or freeze line in a downturn
Risk Warning
Using your home as collateral for a flip means a failed project puts your housing at risk. Only use a HELOC for flips if you have sufficient reserves to cover the balance even if the flip produces a total loss.
Option 4: Cash (Self-Funding)
Paying cash for a flip eliminates financing costs entirely and gives you maximum speed and negotiating leverage.
Cost Structure: Same Deal, All Cash
| Item | Amount |
|---|---|
| Purchase price | $150,000 |
| Rehab | $40,000 |
| Closing costs | $4,000 |
| Total capital deployed | $194,000 |
| Financing cost | $0 |
Pros
- No interest, no points, no fees
- Close in 7 days or less (cash offers win in competitive situations)
- No lender inspections or draw schedules
- No risk of loan default or extension fees
- Maximum profit per deal
Cons
- Ties up significant capital in a single deal
- Opportunity cost (that $194K could fund 3-4 leveraged deals)
- No leverage amplification of returns
- Not scalable unless you have deep pockets
When Cash Makes Sense
Cash is most advantageous for smaller deals ($50K-$150K all-in) where hard money costs would eat a disproportionate share of profit. If a deal will produce $20K in profit and hard money costs $15K, the financing consumes 75% of your return. Cash keeps the full $20K.
Option 5: Conventional Renovation Loans (FHA 203K / Fannie Mae HomeStyle)
These are government-backed or conventional loans designed for properties that need significant renovation. They combine the purchase and rehab costs into a single long-term mortgage.
How It Works
You purchase the property and fund renovations through a single loan. The loan amount is based on the future (post-renovation) value. Funds for rehab are held in escrow and disbursed as work is completed, similar to hard money draws but with more oversight.
Key Limitation
These loans require owner occupancy. You must live in the property (or intend to). This makes them suitable for a live-in flip — buy, renovate while living there, sell after the minimum occupancy period (typically 1 year for conventional, 1 year for FHA).
Cost Structure: Same Deal as Owner-Occupant
| Item | Amount |
|---|---|
| Purchase price | $150,000 |
| Rehab | $40,000 |
| Total loan amount | $190,000 |
| Down payment (5% FHA 203K) | $9,500 |
| Interest rate | 6.75% |
| Monthly P&I | $1,233 |
| 12-month cost (minimum hold) | $14,796 |
| MIP (FHA) | ~$2,400/yr |
| Total financing cost (Year 1) | $17,196 |
Higher total cost than hard money over the longer hold period, but dramatically lower out-of-pocket investment ($9,500 vs $19,500).
Pros
- Low down payment (3.5% FHA, 5% conventional)
- Low interest rate
- Long-term financing (keep as rental after occupancy period)
- Builds equity through forced appreciation
Cons
- Owner-occupancy required (not for pure investors)
- Extremely slow (45-60 day close, plus draw bureaucracy)
- Strict contractor and scope requirements
- Limited rehab flexibility
- FHA inspection requirements are stringent
Which Option Fits Your Situation?
| Investor Profile | Best Option(s) |
|---|---|
| First flip, limited capital | Private money or HELOC |
| First flip, owner-occupant | FHA 203K or HomeStyle |
| Experienced flipper scaling | Hard money |
| Strong network of investors | Private money |
| $200K+ liquid assets | Cash for smaller deals, hard money for larger |
| Multiple simultaneous flips | Hard money + private money combo |
Many experienced flippers use a combination. A common approach is to use hard money for acquisition and rehab, then layer in private money or HELOC funds for the down payment and holding costs.
Calculating Total Financing Cost
No matter which option you choose, always calculate total financing cost — not just the interest rate:
Total Financing Cost = (Interest x Months) + Points + Origination Fees + All Other Fees
Then calculate financing cost as a percentage of projected profit:
Financing Cost Ratio = Total Financing Cost / Projected Net Profit
If financing consumes more than 30-40% of your projected profit, the deal’s margin for error is thin. A rehab overrun or slower-than-expected sale could eliminate your profit entirely.
Model the full scenario in our flip calculator.
For more on structuring profitable flips, see our fix and flip guide.
Frequently Asked Questions
Can you flip a house with no money down?
Yes, but it requires creative financing. Private money lenders may fund 100% of the purchase and rehab. Some hard money lenders will fund 90% of purchase and 100% of rehab if the deal has strong numbers (low LTV relative to ARV). You still need cash for closing costs and holding costs. Truly zero out-of-pocket is possible but rare and requires an excellent deal and willing lenders.
Is hard money or private money better for flipping?
It depends on your network and deal volume. Hard money is more accessible and scalable — any experienced flipper can get a hard money loan. Private money offers better terms and more flexibility but depends on personal relationships. Most successful flippers develop both funding sources.
How much cash do you need to flip a house?
At minimum, expect to need 10-15% of the total project cost in cash, even with financing. On a $200K total project (purchase + rehab), that is $20K-$30K for down payment, closing costs, and reserves. Cash flips require the full amount plus a buffer.
Can I use an FHA loan to flip a house?
Not in the traditional sense. FHA loans (including 203K) require owner-occupancy with a minimum 1-year residence period. You can buy a property, renovate it, live in it for a year, and then sell it. This is called a “live-in flip.” You cannot use FHA to buy, renovate, and immediately resell.
What is the cheapest way to finance a flip?
Cash is cheapest in absolute terms (zero financing cost). Among borrowed options, a HELOC is typically cheapest because rates are lower and there are no points or origination fees on draws. However, a HELOC puts your primary residence at risk, so the cheapest option is not always the best option.