Disclaimer: PropStream does not provide financial, legal, tax, or investment advice. Financing terms, rates, fees, and eligibility requirements vary by lender and borrower. Always perform your own due diligence and consult qualified professionals before making financing or investment decisions.
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Key Takeaways
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You've seen it on TV—you buy an old, run-down house, give it a makeover, and sell it for big bucks. Fix and flip is a popular real estate investment avenue, and for good reason. While the work can be intense, the rewards can be very worthwhile.
However, there is a lot that goes into a successful flip. From finding opportunities to carefully planning a budget to finding a buyer. However, an often overlooked aspect of flipping is securing the capital to not only purchase the property, but pay for renovations and other unexpected costs as well.
In this article, we explore how flippers can finance their next fix and flip project to set themselves up for the highest possible return.
New to fix and flip investing?
Before exploring financing options, check out PropStream Academy's Fix and Flip Like a Pro: Find Properties & Maximize ROI course. Learn how to identify investment opportunities, evaluate deals, estimate renovation costs, and maximize potential returns before securing funding.
Table of Contents |
Analyze the Deal Before Choosing a Financing Option
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Many new investors tend to focus on getting funding first, but experienced fix-and-flip investors usually start by looking at the potential profit of the property, the scope of renovations, the holding costs, and the resale value. This knowledge can help you decide if a project is worth pursuing and how much financing you might really need.
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Before committing to a financing option, consider evaluating:
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Taking the time to analyze these factors upfront can help investors avoid overpaying, underestimating renovation expenses, or taking on more debt than a project can reasonably support.
Pro Tip: Before seeking financing, use PropStream's Fix & Flip Analyzer to quickly estimate rehab expenses, holding costs, financing costs, projected profit, ROI, and Maximum Allowable Offer (MAO). Having a clear understanding of the numbers can help you make more informed financing decisions and quickly identify whether a deal aligns with your investment goals.
Hard Money Loans
Hard money loans are intended for people who either don’t have good credit or expect to pay off the loan quickly — generally within one or two years. Private lenders provide these loans, as opposed to established banks. This makes it significantly easier to qualify for hard money loans than for traditional loans. Plus, the money is usually available in less than 15 days.
Investors may access hard money financing through individual private lenders, lending brokers, or financing platforms that connect borrowers with multiple lending options.
| Pros | Cons |
| Faster approval and funding compared to traditional mortgages | Higher interest rates than traditional loans (10-15%) |
| More flexible eligibility requirements | Shorter repayment terms, often 6 to 24 months |
| Designed specifically for real estate investment projects | Additional lender fees and points may apply |
| Can be used for properties that may not qualify for conventional financing | Monthly carrying costs can add up quickly, reducing overall profit margins |
Cash-Out Refinances
This option allows property owners to tap into the equity they've built in an existing property to help fund a fix-and-flip project.
You obtain a new loan that’s slightly higher than the value of your present home. The new loan will pay off the existing mortgage, and depending on how much equity you've established in your current home, you may have money left over as cash to invest in your fix-and-flip.
| Pros | Cons |
| Typically, lower interest rates than hard money loans | Requires a high equity property |
| Access to a potentially large amount of capital as cash | Longer approval timelines |
| Fixed monthly payments may provide predictable budgeting | Extends or replaces your current mortgage obligation |
| Can be used for property acquisition, renovations, or other investment-related expenses | Closing costs and refinancing fees can reduce available funds |
Pro Tip: Before pursuing a cash-out refinance, compare the long-term cost of refinancing your existing mortgage against the expected profit from the fix-and-flip project. In some cases, refinancing may provide lower borrowing costs, but it could also increase your overall debt obligation for years to come.
Home Equity Loan or Line of Credit (HELOC)
A home equity loan or line of credit is also beneficial to those who have built equity in their existing property. It allows you to borrow money by utilizing the equity in your property as collateral. In fact, many mortgage lenders would allow you to borrow up to 85% of your home's equity on a second mortgage.
| Pros | Cons |
| Lower interest rates than many fix-and-flip financing options | Requires significant equity in an existing property |
| Access home equity without refinancing your existing mortgage | Your home serves as collateral |
| Interest is typically charged only on the amount withdrawn, not on the total approved. | Many HELOCs have variable interest rates |
| HELOCs allow you to draw funds as needed | Borrowing limits may not cover larger projects |
| Useful for renovation costs that occur over time | Monthly payments can impact cash flow during renovations |
Pro Tip: Many investors use a HELOC as a backup source of capital rather than drawing the full amount immediately. Having access to funds can help cover unexpected renovation expenses, permit delays, or budget overruns without requiring additional financing.
Crowdfunding
Real estate crowdfunding allows investors to raise capital from a group of individuals through specialized online platforms rather than relying on a single lender. Today, numerous crowdfunding platforms offer opportunities across residential, commercial, development, and fix-and-flip projects, giving investors additional ways to access capital outside of traditional financing channels.
| Pros | Cons |
| Access to capital without relying solely on banks or private lenders | Funding is not guaranteed and may depend on investor interest |
| Some platforms are open to non-accredited investors, expanding participation opportunities | Some platforms are available only to accredited investors |
| Can help fund projects that may not qualify for conventional financing | Minimum investment requirements can vary significantly between platforms and investment types |
| Certain platforms offer relatively low minimum investment requirements, making them accessible to a broader audience | Fees can include a combination of organizational and offering costs, asset management fees, servicing fees, origination fees, or advisory fees |
| Allows investors to diversify funding sources | Investments are often less liquid than traditional financing options |
Pro Tip: Be sure to review all fee structures and investment timelines before committing capital, as these costs can significantly impact your overall returns.
Funding Made Simple with LoanGeek
While hard money loans, cash-out refinances, HELOCs, and crowdfunding remain the most well-known ways to fund a fix-and-flip project, PropStream users can now explore financing opportunities through LoanGeek directly from the platform. Rather than researching lenders independently, investors can evaluate financing options as they analyze potential deals, creating a more streamlined path from property research to funding.
| Pros | Cons |
| Move from deal analysis to financing without leaving PropStream | Open bankruptcies or foreclosures may impact eligibility |
| Access and compare offers, terms, and fees from multiple lenders before making a decision | Financing terms, rates, and fees vary based on the borrower, property, and loan program |
| Financing available for fix-and-flips, rental properties, construction projects, commercial properties, and refinances | Approval depends on factors such as the asset, exit strategy, and investor experience |
| No minimum credit score requirement to apply and get tailored loan options | Funding timelines can vary depending on lender requirements and transaction complexity |
| Typically receive initial feedback within 24 hours | Borrowers may still need to provide documentation and satisfy lender-specific underwriting requirements |
Sign up for a 7-day free trial of PropStream to search for opportunities, analyze deals, and explore financing options through LoanGeek—all from one platform.
Fix-and-Flip Financing: The Bottom Line
When done correctly, flipping a property can be a rewarding experience. In a short period of time, you can potentially renovate and sell the house for a considerable profit. Of course, investing in a fix-and-flip does require some upfront costs. Obtaining financing for a real estate investment is never without its risks. Always do your homework to ensure your method of funding suits your individual needs.
With PropStream, investors can search for opportunities using an intuitive search menu, identify motivated sellers and investment opportunities using aggregated data, connect with powerful marketing features, and now transact more confidently by exploring financing opportunities through LoanGeek. By bringing property discovery, deal analysis, lead generation, and financing together, PropStream helps investors move from opportunity to execution with greater speed and confidence.
