Private Money Lending for Fix and Flip Investors: The Complete Guide

Fix-and-flip investing and private money lending were made for each other. The speed and flexibility of private money aligns perfectly with the fast-moving, time-sensitive nature of house flipping. Here’s everything you need to know.

Why Fix-and-Flip Investors Use Private Money

Banks won’t lend on distressed properties. Bank loans take 30–60 days to close. And banks certainly won’t fund renovation costs. Private money solves all three problems: it funds the purchase, covers part of the rehab, and closes in days not weeks.

The Typical Fix-and-Flip Loan Structure

Most private lenders fund fix-and-flip deals using one of two approaches:

Option A: Purchase + Rehab Hold-Back

• Lender funds 100% of the purchase price (up to 70% LTV)
• Renovation funds are held in reserve and released in draws as work is completed
• Borrower submits draw requests with photos and receipts

Option B: Purchase Only (Borrower Self-Funds Rehab)

• Lender funds only the purchase (lower LTV, lower rate)
• Borrower uses their own cash for renovations
• Lower cost but requires more capital reserves

Running the Numbers: Fix-and-Flip Deal Example

• Property: $100,000 purchase price
• Renovation Budget: $30,000
• ARV: $185,000
• Private Money Loan: $100,000 at 10% for 9 months
• Points: 2 ($2,000)
• Monthly Interest: $833
• Total Carrying Cost: $7,497
• Sale Price: $185,000
• Profit After All Costs: ~$35,000+

What Lenders Look at in Fix-and-Flip Deals

• Purchase price vs. ARV (looking for 70% rule or better)
• Detailed, itemized renovation budget
• Your exit strategy (list date, listing agent, target sale price)
• Your track record on previous flips
• The local comparable sales (comps) supporting the ARV

Rehab Draw Schedules: How They Work

When lenders include rehab funds, they’re released in stages:

• Draw 1: 25% of rehab budget (foundation, framing complete)
• Draw 2: 50% completion (rough plumbing, electrical done)
• Draw 3: 75% completion (drywall, HVAC complete)
• Final Draw: Property 100% complete and ready for sale

Each draw requires an inspection or photo documentation.

Common Mistakes Fix-and-Flip Investors Make

• Over-estimating ARV (be conservative)
• Under-estimating renovation costs (add 15–20% buffer)
• Not having an exit strategy before borrowing
• Choosing a lender based on rate alone (relationship and reliability matter)
• Missing the draw schedule documentation requirements

Finding Private Money for Your First Flip

Start with your personal network, local REI meetups, and BiggerPockets. Bring a deal package showing your purchase price, renovation plan, comparable sales, and projected profit. Even without a track record, a compelling deal can get funded.

Get the full foundation: private money lending basics, how to find private money lenders, and how to pitch private money lenders.