Hard Money Loans for Fixer Uppers: What Investors Need to Know

Hard Money Loans for Fixer Uppers: What Investors Need to Know

Hard Money Loans for Fixer Uppers: What Investors Need to Know

Most people think you need hundreds of thousands in cash to flip houses.

That's not true.

Hard money loans for fixer uppers let you buy and renovate properties without tying up all your capital. They close in 14-21 days and fund based on the property's after-repair value.

But they're expensive—rates run 10-14%+, and if you don't understand how to use them strategically, the costs eat your profits.

After 8 years in real estate investment and 4 years of flipping houses personally, I've learned what works. This guide explains how hard money works for fix-and-flip investors, what it costs, when leverage makes sense, and the mistakes that kill deals.

What Is a Hard Money Loan?

A hard money loan is short-term financing secured by real estate.

The primary qualifier is the property's after-repair value (ARV), but lenders also look at your financials—credit score, income, bank statements. Some lenders are more lenient than others, but expect them to verify you can handle the deal.

Lenders who don't check your financials at all typically charge significantly more in interest and points. You're paying a premium for that flexibility.

Hard money lenders are private individuals or companies that fund deals in 14-21 days. They specialize in properties that need work—exactly what fix-and-flip investors buy.

At The von Group, we don't have enough cash yet to do the volume we'd like with straight cash, so we use hard money. We also work with private lenders on certain deals when the parameters match what they're looking for.

Hard money is built for fix-and-flip investors who need speed and flexibility.

How Hard Money Loans for Fixer Uppers Work

Hard money loans are asset-based. The property's value matters most, but your financials still get reviewed.

Here's the typical structure:

Loan-to-value (LTV): Most lenders fund 65-75% of the ARV. Some go up to 85-90% on strong deals.

Example:

• ARV: $200,000

• Lender LTV: 70%

• Max loan amount: $140,000

If you're buying for $120,000 and need $30,000 for rehab, the lender funds $140,000 total. You bring $10,000 ($120,000 purchase + $30,000 rehab – $140,000 loan).

Interest rates: 10-14% APR typically. Experienced investors with strong deals can get 8-9%.

Points: 2-5 points upfront. One point = 1% of loan amount. On a $140,000 loan at 3 points, you pay $4,200 upfront.

Term: 6-18 months. Extensions cost 1-2 points per 3-6 month extension.

Payments: Interest-only with balloon payment at end. Some lenders offer deferred payments until sale.

Prepayment penalties: Some lenders charge if you pay off early. Ask upfront.

How to buy a fixer upper walks through the complete acquisition process, including how financing fits into your overall strategy.

The Lenders We Work With

We have a few lenders we work closely with because we know they can close on time and we trust them to prioritize our transactions.

When investors work with us, we connect them with the right lender based on their goals.

Higher LTV lenders: Less cash out of pocket, but higher interest rates and points.

Deferred interest lenders: No monthly interest payments—everything paid at sale.

Lower LTV lenders: More cash in the deal, but much more favorable rates and points to keep more profit.

When investors meet with us, we gather insight into their needs and connect them with the right lenders.

What Hard Money Loans for Fixer Uppers Actually Cost

Here are real numbers:

Example scenario:

• Loan amount: $150,000

• Interest rate: 12% APR

• Points: 3 ($4,500 upfront)

• Term: 12 months

• Monthly interest-only payment: $1,500

• Total interest over 12 months: $18,000

• Total cost: $22,500

If your flip generates $40,000 profit, you net $17,500 after loan costs.

If you sell in 6 months instead of 12, you save $9,000 in interest.

Speed matters. The faster you flip, the less hard money costs.

The Power of Leverage: Why Hard Money Makes Sense

One of the best things about real estate investing is leverage.

Yes, lenders charge money. But when you compare the return on investment using hard money versus leaving all your capital in one deal, it's a no-brainer.

We sell deals regularly where investors make 40-60% cash-on-cash return in 4-6 months. Annualized, that's 80-120%. Real estate is the only investment that can offer that, even when you pay higher interest rates and points.

Here's a real example:

The average house we sell has a purchase price in the $150-250k range and needs $75-100k in rehab.

Say you have $300k in cash. We have a house with a $385k ARV that needs $100k in rehab. You can expect us to sell it for around $200k.

Option 1: All cash

After fees (commissions, post-inspection repairs, closing costs), you clear around $50-60k profit.

That's 16.7%-20% cash-on-cash return in 4-6 months. If you did that twice a year, that's up to 40% annualized.

Option 2: Leverage with hard money

With $300k leveraged using hard money, you have about $50k invested per house. You can buy 6 houses.

You won't make $50-60k on each, but you should make $25-35k per house if done correctly.

Multiply by 6: you make $150k-$210k off the same $300k.

That's a huge win compared to all cash in one deal. That's the true value of leverage.

If you have enough cash for one deal but don't have the team to manage multiple projects, do the deal cash. But if you have a solid team where you can manage multiple projects simultaneously, leveraging with hard money is the best option.

Where to Find Properties That Work with Hard Money

Hard money works best with properties you can acquire quickly and renovate profitably.

How to find investment properties covers 9 proven deal sources, including off-market channels, wholesalers, and MLS strategies.

Off-market fixer upper homes explains why off-market deals pair perfectly with hard money financing—less competition, faster closings, and motivated sellers.

Wholesale real estate deals breaks down how to evaluate deals from wholesalers who often work with hard money buyers.

The key is finding properties with enough spread between purchase price and ARV to cover hard money costs and still generate profit.

The Biggest Mistakes Investors Make with Hard Money Financing

After working with hundreds of investors using hard money loans for fixer uppers, here are the mistakes that cost money:

Mistake 1—Taking Too Long to Finish

Every extra month costs you in interest. If you're paying $1,500/month and the project runs 3 months over, that's $4,500 out of profit.

Budget realistic timelines and add buffer.

Mistake 2—Picking the Wrong Listing Agent

This kills deals more than people realize.

Real example:

An investor bought a house from us in Lakewood Heights, Atlanta. He did an absolutely beautiful renovation.

He listed with a family member who didn't get professional photos. The first picture made the house look like a fixer upper because of the angle and lighting.

If the first picture doesn't look good, buyers on Zillow scroll right past it.

He should have sold that house in a heartbeat. But due to poor marketing, he spent a ton in interest and had to refi to avoid losing money.

The von Group's marketing is top-notch. We sold 5759 Albans Way in Lithonia for $354k in 2 weeks with multiple offers when none of our investors thought it would sell for over $300k. That's the kind of marketing that saves thousands in holding costs.

Mistake 3—Choosing the Wrong Lender

Not all hard money lenders perform.

We went under contract with a buyer in September 2024 for 2 houses. That buyer used one of the big, well-known lenders.

We stayed in touch with the lender, regularly asking for updates. About a week before close, they told us everything was ready.

One house was supposed to close September 30th. Seller showed up. We showed up. Lender's funds didn't arrive until Friday, October 3rd.

The other deal was supposed to close October 3rd. Same thing—lender didn't fund until the following Tuesday.

We got lucky the sellers stuck with us. But they could have easily terminated the contract, kept the earnest money deposits, and sold to someone else.

Picking the wrong lender can cost you deals and money.

Mistake 4—Not Understanding What to Look For

Before you commit to a property with hard money financing, you need to know what you're buying.

What to look for when buying a fixer upper covers inspection red flags, major systems to check, and how to estimate repair costs accurately.

Underestimating repairs is one of the fastest ways to kill your profit margin—especially when you're paying 12% interest while contractors fix issues you didn't budget for.

How to Qualify for Hard Money Loans

Down payment: Expect 10-30% of total project cost (purchase + rehab). Less cash means higher rates.

Equity in the deal: Lenders want 20-30% equity cushion. If ARV is $200k and total project cost is $190k, there's not enough room.

Exit strategy: Lenders want to know how you're paying them back. Your track record matters.

Reserves: Some lenders require 3-6 months of payments in reserves if the flip takes longer.

Here's what most people don't realize: we have lenders that can approve deals if you have as little as $15k-$25k in the bank. Many people think flipping is out of reach, but with hard money, it isn't.

Finding Good Hard Money Lenders

Work with The von Group. We connect investors with lenders based on their goals—higher LTV, deferred interest, or lower rates.

Ask other investors. Join local REIAs or BiggerPockets. Ask who people trust.

Work with investor-focused agents. Agents who specialize in flips have lender relationships. Working with an agent to find off-market deals explains how to find agents who understand investor financing.

Attend meetups. Hard money lenders sponsor these events.

Interview at least 3 lenders. Compare rates, points, terms, and closing speed.

Questions to Ask Hard Money Lenders

What's your LTV? Higher LTV means less cash out of pocket.

What's your interest rate? Does it change based on experience or deal strength?

How many points? Are they paid upfront or deducted from the loan?

Closing timeline? 14 days? 21 days?

Do you fund rehab costs? Some fund purchase only. Others fund rehab in draws.

Draw process? How often? What documentation?

Prepayment penalties?

Extension terms? What does an extra 3-6 months cost?

Personal guarantees required?

Get everything in writing.

Hard Money vs Other Financing Options

Hard money isn't the only way to finance fixer uppers, but it's often the best for speed and flexibility.

Some investors consider foreclosures thinking they'll get better deals, but foreclosed homes for sale explains why that source rarely delivers—slow bank processes, institutional competition, and properties that sit overpriced for months don't pair well with any financing strategy.

The best properties for hard money financing are off-market deals where you can close quickly, renovate efficiently, and sell within 6-12 months.

Using Hard Money Loans for Fixer Uppers with The von Group

When you buy from The von Group, hard money works seamlessly:

14-21 day closings. Hard money lenders deliver.

Our profit analysis includes financing costs. We show estimated net profit after interest and points.

We connect you with lenders. Based on your goals, we match you with the right lender.

Title contingency protects you. Our closing attorney handles title issues.

Hard money pairs perfectly with off-market deals that require speed.

How to find fixer upper homes covers additional strategies for sourcing properties that work with hard money financing, including MLS tactics and networking approaches.

Ready to Finance Your Next Flip?

The von Group provides vetted off-market properties perfect for hard money financing. We've closed 150+ deals since 2024.

Get flip-ready properties here.

Connect with hard money lenders here.