Why flip financing is a different problem
A flip loan has to solve for speed and rehab, not just a low rate on a stabilized property.
Distressed deals move fast and often will not qualify for conventional financing because of condition. You frequently need to close quickly and fund a renovation, which is exactly what conventional purchase loans are not built to do.
That is why flippers lean on short-term, asset-based debt for the acquisition and rehab, then exit — either by selling or refinancing into cheaper long-term financing once the property is stabilized.
Hard money: speed and rehab funding at a price
Hard money is short-term, asset-based lending priced for speed and flexibility, not for cheapness.
These loans typically carry higher rates and points, lend against the after-repair value, and can fund rehab in draws. In exchange you get fast closings and financing a bank would refuse on a property in poor condition.
The cost is real, so hard money rewards a fast, well-run project and punishes a slow one. Every extra month of holding is expensive, which makes your timeline assumption a first-class part of the deal.
- Fast closings on properties that will not qualify conventionally.
- Often funds rehab in draws against the scope of work.
- Higher rate and points — built for short holds, not long ones.
Conventional, DSCR, and other exits
Cheaper, longer-term financing usually belongs at the exit, not the acquisition of a distressed flip.
Conventional and DSCR loans price better but move slower and expect a property in lendable condition. That makes them a strong fit for the refinance step in a BRRRR, or for a lighter cosmetic project that already qualifies.
The common pattern is buy and rehab with short-term money, then refinance into a conventional or DSCR loan once the property appraises and, for a rental, rents. The trap is assuming the cheap loan will be available at acquisition when the condition does not support it.
Plan the exit before you borrow
Know how you will pay off the acquisition loan before you take it. A flip sells; a BRRRR refinances. The exit determines which loan is right for the entry.
How financing flows into your offer
Your financing cost is not a side note — it is one of the inputs that sets your maximum offer.
Interest, points, and holding time are part of the deal cost, so more expensive money lowers the price you can pay and still hit your margin. Two investors can look at the same property and reach different offers purely because of their cost of capital.
Model the real financing terms into the deal before you commit. A number that works on cheap conventional money can turn into a loss on hard money if the project runs long.