Fix and Flip Financing: Hard Money vs. Conventional Loans — Which Is Right for You?

The Fix-and-Flip Financing Decision

When you find a great fix-and-flip deal, speed is everything. The property you want to buy is likely distressed, priced below market, and attracting multiple cash buyers. You need to move fast — and your financing choice determines whether you can.

This guide compares the two most common financing options for fix-and-flip investors: hard money loans and conventional mortgages.

Hard Money Loans: Built for Investors

Hard money loans are short-term, asset-based loans from private lenders. They're specifically designed for real estate investors who need fast capital for non-owner-occupied properties.

Advantages

Speed. Hard money loans can close in as few as 7 business days. Some lenders can close in 3–5 days for experienced borrowers with clean deals.

Flexibility. Hard money lenders evaluate the deal, not just your financial profile. Distressed properties, unusual structures, and borrowers with credit challenges can still qualify.

Renovation financing. Many hard money lenders offer construction holdbacks — funds reserved for renovation that are released in draws as work is completed. This means you're financing both the purchase AND the rehab.

No income verification. Most hard money lenders don't require W-2s, tax returns, or proof of employment.

Disadvantages

Higher rates. Hard money rates typically range from 9–14%, compared to 6–8% for conventional investment property loans.

Short terms. Loans are typically 6–18 months. If your project runs over schedule, you may need to refinance or pay extension fees.

Points and fees. Origination fees (points) of 1–3% are standard. These add to your total cost of capital.

Conventional Investment Property Loans

Conventional loans from banks and mortgage companies offer lower rates but come with significant restrictions for fix-and-flip investors.

Advantages

Lower rates. Conventional investment property loans typically carry rates 3–5% lower than hard money.

Longer terms. 15 or 30-year amortization means lower monthly payments.

Disadvantages

Slow closing. Conventional loans typically take 30–60 days to close — far too slow for competitive deals.

Property condition requirements. Banks won't lend on distressed properties. The property must be habitable and meet minimum condition standards.

No renovation financing. Conventional loans don't include construction holdbacks. You'd need separate financing for the rehab.

Income and credit requirements. You'll need strong credit (typically 680+), documented income, and a low debt-to-income ratio.

Side-by-Side Comparison

When to Use Hard Money

Hard money is the right choice when:

• You need to close in under 30 days
• The property is distressed or needs significant renovation
• Your credit or income doesn't meet conventional standards
• You need renovation financing bundled with the purchase loan
• You're competing with cash buyers

When Conventional Financing Makes Sense

Conventional financing may work when:

• You have 45–60 days to close and the seller is flexible
• The property is in good condition and move-in ready
• You're doing a light cosmetic renovation with your own cash
• You plan to hold the property long-term as a rental

The Bottom Line

For most fix-and-flip investors, hard money is the practical choice. Yes, the rates are higher — but the speed, flexibility, and renovation financing more than offset the cost difference when you're executing a well-underwritten deal.

The key is to factor your financing costs into your deal analysis from the start. A deal that works at 10% hard money rates is a good deal. A deal that only works at 7% conventional rates is a marginal deal that depends on perfect execution.

Ready to discuss financing for your next flip? Apply with Crystal Capital and receive a term sheet within 24 hours.