Hard Money Loans for Fix & Flip: How They Work and What They Cost

Hard money lending is one of the most common ways fix-and-flip investors fund a deal — and one of the most misunderstood. Here is what separates it from conventional financing, and how to evaluate whether it fits your project.

What Makes a Loan "Hard Money"

Hard money loans come from private lenders or lending companies rather than banks, and they are secured primarily by the property itself. Underwriting focuses on the deal — purchase price, renovation scope, and after-repair value — more than on the borrower's personal income or debt-to-income ratio.

Typical Terms

Interest rates run meaningfully higher than a conventional mortgage, reflecting the short duration and higher risk the lender takes on. Terms are usually six to eighteen months, interest-only, with an origination fee charged in "points" (a percentage of the loan amount) due at closing.

How Draws Work

Renovation funds are rarely handed over in a lump sum. Instead, they are released in draws as work is completed and verified by an inspection — protecting both the lender's collateral and the investor from over-funding unfinished work.

Calculating the True Cost

Total Financing Cost ≈ Origination Points + (Monthly Interest × Months Held) + Extension Fees (if any)

A loan that looks inexpensive on rate alone can still be costly if the project runs long. Every month added to your renovation timeline adds another interest payment — which is why realistic scheduling matters as much as the interest rate itself.

When Hard Money Makes Sense

It tends to fit deals that need to close quickly, properties in a condition that would not qualify for conventional financing, and investors confident in a tight renovation and resale timeline. It is generally a poor fit for a project with an uncertain scope or an inexperienced first-time renovator.

Questions to Ask Before You Borrow

• How fast are draw requests typically processed once an inspection is complete?
• What happens if the project runs past the loan term — is an extension available, and at what cost?
• Are there prepayment penalties if you sell or refinance early?
• Does the lender service the loan directly, or is it sold or brokered to a third party?

ARKInvest, Corp. does not originate hard money loans or act as a lender. Speak with a licensed lender directly about current rates, points, and terms before committing to a deal.