A hard money loan for a flip is short-term, asset-focused financing that should be evaluated as part of the entire project budget, not by one loan term. Model purchase, rehab, draws, financing carry, holding costs, sale costs and the exit together. A line-by-line worksheet makes the effect of time and changing costs much easier to see.
Updated October 2026
What is a hard money loan in a flip?
Hard money commonly refers to short-term, asset-focused financing used for investment real estate, including acquisitions that need renovation before sale or refinance. The lender typically evaluates the collateral, purchase, rehab plan, borrower liquidity and exit. The useful way to understand it is not through a headline rate but through the complete project budget: acquisition cash, renovation, financing costs, carrying costs, sale costs and the time the capital is outstanding.
How do you run the numbers on your own flip?
The fastest way to understand a hard money loan is to run your own deal through it, line by line. Fill in this worksheet with your real numbers and the terms from each written offer you receive. Lenders on Bancaverse™ quote against your actual deal, so this is what you compare them on.
| Line item | Where the number comes from |
|---|---|
| Purchase price | Your purchase contract |
| Rehab budget | Contractor bids and scope of work |
| Total project cost | Purchase + rehab |
| After-repair value (ARV) | Recent sales of comparable finished homes |
| Loan amount | Each lender’s written term sheet |
| Your cash at closing | Total cost minus what the lender funds, plus closing costs |
| Points and lender fees | Term sheet, in dollars |
| Monthly interest | Term sheet; ask if it’s charged on the full loan or only on drawn funds |
| Taxes, insurance and utilities per month | Tax bill, insurance quote, utility estimates |
| Sale costs | Agent commission and seller closing costs |
| Profit on your planned timeline | ARV minus everything above |
| Profit if it sells 3 months late | Same, plus 3 more months of interest and holding costs, plus any extension fee |
Run the last two rows for every offer. A loan with a lower rate can still cost more if its extension terms are expensive or interest runs on money you haven’t drawn yet. Time is usually what turns a good flip into a thin one, so price the delay before you sign.
Why does drawn balance matter during renovation?
A construction or rehab facility may not put the entire renovation budget in the borrower’s hands on day 1. Funds can be released through draws as work is completed and verified. When interest is calculated on the outstanding balance, the timing of those draws affects carrying cost. The investor still needs liquidity because contractors, deposits and materials may come due before reimbursement. Model the cash calendar, not just the total rehab line.
A flip model should also distinguish committed construction money from cash actually advanced. If the loan includes a rehab budget, the investor may still need to fund work before a draw is reimbursed. That means the maximum loan commitment is not the same thing as day-one cash availability. Put draw timing next to contractor payment dates and keep a liquidity buffer for change orders. The model is strongest when it shows both project profitability and the month-by-month cash requirement.
What do 3 extra months do to the project?
Three additional months can add financing carry, taxes, insurance, utilities, maintenance and opportunity cost while delaying the sale proceeds. The exact dollar impact depends on your loan documents and property expenses, which is why the worksheet in this article uses your own numbers rather than typical terms. The important habit is to run a delayed case before buying. If a modest schedule slip erases the expected profit, the project is too dependent on perfect execution.
Which numbers should be reconciled before closing?
The purchase contract, scope of work, contractor budget, sources and uses, requested loan amount and projected sale analysis should agree. ARV means after-repair value, the estimated value after the planned improvements are complete. Treat ARV as an underwriting input that needs support, not guaranteed sale proceeds. If the appraisal or contractor budget changes, update the model and the financing request together so you are not making decisions from stale numbers.
What goes in your flip loan file?
The flip file should contain the contract, scope of work, line-item budget, contractor information, liquidity, entity documents, property details, insurance and a documented sale or refinance exit. Update the budget when the scope changes.
How Bancaverse™ works for this transaction
Bancaverse™ is a private credit platform and brokerage for business purpose mortgage lending. Borrowers submit one deal for review by private lenders and can compare returned term sheets. Bancaverse™ represents the borrower, earns a brokerage fee only at closing, never charges upfront fees and never takes deposits. Platform loans start at $300,000; lenders generally look for 680+ credit, although investors below that can still start at bancaverse.com/apply.
Related reading: What Is After-Repair Value (ARV) and How Do Lenders Use It?; Fix-and-flip profit calculator.
Treat the worksheet as a model, not a promise of terms. Start with purchase and rehab to establish project cost. Add financing and holding costs by month, not as a vague percentage. Add selling costs and then compare the expected net sale proceeds with the total cash invested. Next, create a delayed case that moves completion and sale 3 months later. The change in profit comes from more than interest: utilities, taxes, insurance, maintenance and potentially additional contractor costs can continue too. Finally, create a lower-sale-price case. ARV is an estimate, so the investment should not depend on receiving the exact top-line value used during acquisition. If the lender funds rehab through draws, add a cash-flow schedule showing when the investor pays contractors and when reimbursement is expected. A flip can look profitable on a static sources-and-uses sheet while still creating a liquidity squeeze halfway through construction. A complete worksheet should expose both risks.
Say your flip is on schedule through the first half of renovation, then a permit or material delay pushes completion back. The investor should update 3 parts of the model immediately: remaining construction cost, monthly carrying cost and expected sale date. If the resale value assumption has also changed, update that separately rather than hiding it inside a larger contingency. This keeps the model honest about why profit moved. Draw financing adds another timing issue. A contractor may finish a phase on Friday, while inspection and reimbursement occur later. The investor therefore needs enough working capital to keep the project moving between draw events. The loan commitment can be large enough on paper and the project can still run out of cash temporarily. A complete hard money worksheet should show that distinction: profitability measures the whole deal, while liquidity determines whether you can actually execute it month by month.
FAQ
What does ARV mean?
ARV is after-repair value: what the property should be worth once the renovation is done, based on recent sales of comparable finished homes. Many flip lenders cap the loan relative to ARV as well as relative to your total cost.
Are the terms in this article a quote?
This article doesn’t quote any terms. Your actual terms come from the lenders who review your specific deal, so plug their written numbers into the worksheet.
Why do draws change carrying cost?
If interest is charged only on money that has actually been drawn, your early months cost less than if interest runs on the full loan from day one. Ask which method applies, because it can change your total cost by thousands on the same deal.
What happens when a flip takes 3 months longer?
You keep paying interest, taxes, insurance and utilities, and you may owe an extension fee if the loan matures first. Run the late-sale row in the worksheet above for every offer, because extension terms can matter more than the rate.
Should I include selling costs in the model?
Yes. Agent commissions, seller closing costs and concessions are often the biggest cost after the purchase and rehab. Leaving them out is the most common way a flip that looked profitable ends up thin.
What should the final flip model show before you buy?
It should show purchase, rehab, contingency, financing, holding and disposition assumptions in one place, with timing. Run a base case and a delayed case. Keep ARV separate from actual sale proceeds and show what happens when the sale price or schedule changes. If the project only produces acceptable economics when every line hits the optimistic case, reconsider the acquisition before the loan makes the decision for you.
Ready to compare real offers? Sign up for quotes or call (737) 300-9920 to submit the investment-property request.
Five assumptions to check before you apply:
- Don’t assume ARV is guaranteed sale proceeds.
- Don’t assume the rehab budget is available as cash on day 1.
- Don’t assume interest is the only cost of a delay.
- Don’t assume profit and liquidity measure the same risk.
- Don’t treat any example as a financing quote.
For each one, get it confirmed in writing (property facts, the term sheet or the loan documents) and know who is responsible for confirming it before closing.
