A deep dive into every financing option available to house flippers — from hard money loans to self-directed IRAs.
Most people who want to flip houses get stopped at the same point: money. They find a deal, run the numbers, confirm it is profitable — and then realize they do not have enough cash to buy the property outright. The good news is that the vast majority of house flippers do not use their own cash for the full purchase. They use leverage — other people's money — to fund their deals and multiply their returns.
This guide breaks down every financing option available to flippers, explains the real costs of each, and helps you decide which approach fits your situation.
Hard money loans are the most common financing tool for house flippers. These are short-term loans issued by private lending companies that are secured by the property itself, not by your income or credit score (though both are still considered).
How they work. A hard money lender will typically lend 70 to 90 percent of the purchase price and 70 to 100 percent of the renovation costs, up to a maximum of 65 to 75 percent of the ARV. You bring the remaining 10 to 30 percent as a down payment, plus closing costs.
Typical terms:
Example. You buy a property for $150,000 with a $40,000 renovation budget. The hard money lender finances 85 percent of the purchase ($127,500) and 100 percent of the renovation ($40,000). You bring $22,500 as a down payment plus roughly $5,000 in closing costs and origination fees. Your monthly interest payment on a $167,500 loan at 12 percent is approximately $1,675.
Pros: Fast closing, asset-based (less focus on your personal financials), renovation costs often included in the loan. Cons: Expensive, short terms create time pressure, monthly payments eat into profit if the project runs long.
Best for: Flippers who need speed and leverage, have a solid deal, and plan to complete the flip within 6 months.
Private money comes from individuals — friends, family, colleagues, or acquaintances — who lend you their personal funds in exchange for a return. Unlike hard money lenders, private lenders are not in the lending business. They are people with capital looking for a better return than their savings account or stock portfolio offers.
How to find private lenders. Start with your existing network. Mention at social gatherings, professional events, and online that you are a real estate investor. Many people are interested in earning 8 to 12 percent returns secured by real property but do not know how to access those opportunities. You are providing a service, not asking for a favor.
How to pitch. Present the deal, not yourself. Show the private lender the property details, your comparable sales analysis, your renovation budget, your projected timeline, and your projected profit. Explain how their investment is secured by the property (first-position lien or mortgage), what return they will earn, and what happens if the deal goes wrong (they get the property).
What private lenders expect:
Structuring the deal. Always use a promissory note and a mortgage or deed of trust recorded with the county. This protects both parties. Have a real estate attorney draft the documents. The cost ($500 to $1,500) is worth the legal clarity.
Best for: Flippers with a strong personal network and the ability to present deals professionally. Often cheaper than hard money.
Traditional bank financing is generally not ideal for flipping because of slow closing timelines (30 to 45 days), strict income and credit requirements, and the fact that most conventional loans require the property to be in livable condition — which many flip candidates are not.
However, there are two conventional loan products worth knowing about.
FHA 203(k) loans. These government-backed loans allow you to finance both the purchase and renovation of a property with a single mortgage. The catch: you must live in the property for at least one year. This makes the 203(k) a "live-in flip" strategy — buy a fixer-upper as your primary residence, renovate it while living there, and sell after 12 months. Down payments can be as low as 3.5 percent.
Investment property loans. If you have strong credit (720 or higher), verifiable income, and at least 20 to 25 percent down, some banks and credit unions will finance investment property purchases. Interest rates are typically 1 to 2 percent higher than primary residence rates. The main downside is the slow closing timeline, which can cause you to lose deals to cash buyers and hard money borrowers.
Best for: The 203(k) is ideal for first-time flippers willing to live in the property. Investment property loans suit experienced flippers with strong financials and patience for longer closings.
If you own a primary residence with equity, you can tap that equity to fund your flips.
Home Equity Line of Credit (HELOC). A HELOC gives you a revolving line of credit secured by your home. You draw funds as needed and pay interest only on what you use. Typical rates are prime plus 1 to 3 percent. Most lenders allow you to borrow up to 80 to 85 percent of your home's value minus your existing mortgage balance.
Cash-out refinance. You replace your existing mortgage with a larger one and receive the difference in cash. For example, if your home is worth $400,000 and you owe $200,000, a cash-out refinance at 80 percent LTV gives you $120,000 in cash. Rates are slightly higher than standard refinance rates but much lower than hard money.
The risk. Both options put your primary residence on the line. If your flip fails and you cannot repay the HELOC or cover the higher mortgage payment, you could lose your home. Use this strategy only if you have significant equity, stable income, and a conservative approach to deal selection.
Best for: Homeowners with substantial equity who want the lowest possible borrowing cost and are comfortable with the risk to their primary residence.
Partnerships allow you to combine skills and capital. Typically, one partner provides the money and the other provides the labor, expertise, and project management.
Common equity splits:
Operating agreements. Every partnership must have a written operating agreement drafted by an attorney. This document should cover: capital contributions, responsibilities of each partner, decision-making authority, profit and loss allocation, dispute resolution, and exit provisions. Verbal agreements between friends are the fastest way to destroy both the friendship and the investment.
Best for: Beginners who lack capital but have time and willingness to learn, or experienced flippers who want to scale by taking on money partners.
In seller financing (also called owner financing), the property seller acts as the lender. Instead of receiving the full purchase price at closing, the seller receives a down payment and then monthly payments from you over an agreed term.
Typical terms:
When it works. Seller financing is most likely when the seller owns the property free and clear (no existing mortgage), is motivated to sell but cannot find a buyer through traditional channels, and wants to spread their tax liability over multiple years (installment sale). Elderly homeowners, landlords tired of managing rental properties, and estate executors are common candidates for seller financing.
How to propose it. Present seller financing as a benefit to the seller, not just to you. Emphasize the steady income stream, the interest they will earn, and the tax advantages of an installment sale. Offer a higher purchase price than you would with a cash offer — the seller's willingness to finance often costs you a few thousand dollars more but saves you tens of thousands in hard money fees.
Best for: Off-market deals where the seller owns the property outright and is open to creative terms.
A self-directed IRA (SDIRA) allows the account holder to invest retirement funds in alternative assets, including real estate loans. You cannot lend from your own SDIRA to yourself, but you can borrow from someone else's SDIRA — or use your own SDIRA to purchase properties directly.
How it works as a borrower. An SDIRA holder lends their retirement funds to you, secured by the property. The interest payments go back into their SDIRA, growing tax-deferred (traditional) or tax-free (Roth). The SDIRA custodian handles the paperwork and ensures IRS compliance.
How it works as a buyer. If you have a well-funded SDIRA, you can purchase flip properties directly through the account. All profits flow back into the IRA. However, you cannot perform any labor on the property yourself (a prohibited transaction), and all expenses and income must flow through the SDIRA.
Key restrictions:
Best for: Borrowers who know SDIRA holders willing to lend (common in real estate investor networks), or investors with large retirement accounts who want to flip within their IRA.
| Option | Typical Rate | Down Payment | Speed to Close | Best For |
|---|---|---|---|---|
| Hard Money | 10-15% | 10-30% | 7-21 days | Speed and leverage |
| Private Money | 8-12% | Negotiable | 7-14 days | Lower cost, flexible terms |
| FHA 203(k) | 6-8% | 3.5% | 45-60 days | Live-in flips |
| HELOC | Prime + 1-3% | 0% (uses equity) | 14-30 days | Homeowners with equity |
| Partnership | Equity split | 0% | Varies | No capital, have skills |
| Seller Financing | 6-10% | 10-20% | 14-30 days | Off-market deals |
| Self-Directed IRA | 8-12% | Negotiable | 14-30 days | Investor networks |
Start here and follow the path that matches your situation.
Do you have cash to fund the full purchase and renovation?
Do you own a home with at least $50,000 in accessible equity?
Do you have a strong personal network with people who have investable capital?
Do you have at least 10 to 20 percent of the purchase price in cash savings?
Are you willing to live in the property for 12 months?
Do you have construction skills, project management experience, or real estate knowledge but no capital?
Lack of personal cash is not a valid reason to avoid house flipping. It is a valid reason to learn about financing. The most successful flippers use leverage strategically — borrowing at a known cost to earn a higher return. Your job is to understand the true cost of each financing option, choose the one that fits your situation, and structure your deals so the numbers work even after all borrowing costs are accounted for.
Start with one financing strategy, master it, and expand from there. Most experienced flippers use two or three different funding sources depending on the deal. The more financing tools you understand, the more deals you can close.