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Hard Money / Bridge Loan

Will the fix-and-flip make money?

See how much a hard money lender would lend on a renovation project, how much cash you’d need, and what you’d keep after selling. You’ll need the purchase price, a renovation budget, an estimate of the finished sale price, and the loan terms.

  1. A fast, expensive, short-term loan

    A funds the purchase and renovation of a house you plan to sell soon. It closes fast but charges high interest and upfront , and the full balance is due at the end of a short term.

  2. The lender caps the loan two ways

    It lends the smaller of a share of your total cost () and a share of the finished value (, or ARV). You cover the rest in cash.

  3. Profit is what’s left after the sale

    Sale price, minus selling costs, minus what you paid for the house and renovation, minus interest, points, and holding costs. Every extra month before you sell adds interest and bills, so delays come straight out of profit.
Two inputs come from other people: a contractor’s estimate sets the renovation budget, and a local agent’s list of recent sales of updated homes nearby sets the ARV. For how flipping compares with renting, read Real estate investing 101.
The project

What you’ll pay, what you’ll spend fixing it up, what it should sell for afterward, and how long until it sells.

$
$
$
mo
The loan

Hard money lenders lend the smaller of two caps. Use the terms from a lender’s quote if you have one; the defaults are typical.

%
%
%
%
mo
Carrying and selling costs

Bills you pay while you own it, and the cost of selling at the end.

$/mo
% of sale

Estimated profit

$52,800

$350,000 sale − $21,000 selling costs (6%) − $225,000 loan payoff − $25,000 of your cash in the project − $26,200 carrying costs (points, interest, holding) = $52,800. Return on your cash: 103.1%

Loan amount

$225,000

limited by loan-to-cost (90% of cost)

Cash you bring

$25,000

price and rehab the loan doesn’t cover

Lender points

$4,500

2% of the loan, paid upfront

Interest while you hold

$16,500

$2,063/mo for 8 mo (full loan from day 1)

Holding costs

$5,200

$650/mo × 8 mo (taxes, insurance, utilities)

Total carrying cost

$26,200

points + interest + holding (10.5% of project)

Estimated profit

$52,800

103.1% return on your cash

What this means

If the home sells for $350,000 after 8 months, you’d clear about $52,800 on $51,200 of your own money, a 103.1% return for the whole project (not per year). The lender covers $225,000 of the $250,000 price and renovation, limited by its 90% loan-to-cost cap. Points, interest, and holding costs add $26,200, and each month adds about $2,713. By the , the most you’d pay is about $195,000; your price is $5,000 above it, which leaves a thinner cushion for surprises.

Income tax on the profit isn’t included, and the loan is a : the full $225,000 is due when the term ends, so plan your exit (sale or refinance) before you buy.

What could change your profit

Sell in 7 months instead of 8+$2,713
Sell in 10 months instead of 8-$5,425
Renovation runs 15% over budget ($57,500)-$8,130
Sells for 5% less ($332,500)-$16,450

What this calculator doesn’t model

The default 6% selling cost covers the listing agent’s commission after the NAR settlement, a payment to the buyer’s agent if you offer one, and closing fees. These vary by state and by how you negotiate the buyer’s agent pay.

Renovation overruns are almost universal. Plan for 10% to 20% over budget. The 70% rule (don’t pay more than 70% of ARV minus the renovation cost) builds in margin for surprises.

At hard money rates, every month a flip runs past plan cuts into profit. If the hold runs past the loan term, extension fees and any rate increase aren’t modeled.

This calculator charges interest on the full loan from day 1, which is conservative. Many lenders hold the renovation money in an account and release it in stages (called draws) as work is finished, charging interest only on what’s been released, so your interest may be lower. Check your term sheet.

Flip profits are usually short-term , taxed at ordinary income rates, if you flip occasionally. If you flip regularly, the IRS may treat you as a dealer: the profit is ordinary business income and is also subject to self-employment tax.

Hard money is for experienced operators who know their market and have a clear exit (sell, or refinance into a long-term loan). For first-timers, consider partnering with someone who’s done it before.

Results are estimates based on your inputs and the assumptions on this page, not quotes or advice. A lender, servicer, or tax advisor will give you different numbers. Disclaimer

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Terms used on this page

Flippers and hard money lenders use a lot of shorthand. This is what it stands for.

Hard money loan
A short-term loan from a private lender, made mainly on the property’s value rather than your income. It closes fast and can fund a renovation, but charges high interest and upfront points.
Fix-and-flip
Buying a property that needs work, renovating it, and selling it within months for a profit.
ARV (after-repair value)
What the property should sell for once the renovation is finished, estimated from recent sales of similar updated homes nearby.
LTC (loan-to-cost)
The loan as a percentage of the purchase price plus renovation cost. Hard money lenders typically fund 80% to 90%.
LTV (loan-to-value)
The loan as a percentage of the property’s value. On a flip, lenders measure it against ARV, typically capping the loan at 65% to 75%. More
Points
An upfront lender fee quoted as a percentage of the loan. One point is 1% of the loan, paid at closing. More
Hold period
How long you own the property, from purchase to sale. Every month adds interest and holding costs.
Holding costs
Bills you pay while you own the property besides loan interest: property taxes, insurance, utilities, and upkeep.
Balloon payment
The full loan balance coming due in one lump sum at the end of the term. On a flip, you repay it by selling or refinancing.
The 70% rule
A flipper’s rule of thumb: pay no more than 70% of the after-repair value minus the renovation cost. The other 30% covers financing, holding, and selling costs plus your profit.

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