Hard Money / Bridge Loan
Will the fix-and-flip actually pencil?
Estimated profit
$51,000
$350,000 sale − $28,000 sale costs (~8%) − $225,000 loan payoff − $25,000 cash invested − $21,000 financing costs = $51,000. Cash-on-cash return: 204.0%
Max loan
$225,000
LTC binding (90% of cost)
Cash required
$25,000
down + reserves
Points (upfront)
$4,500
2% of loan
Total interest over hold
$16,500
$2,063/mo for 8 mo
Total financing cost
$21,000
8.4% of project
Estimated profit
$51,000
204.0% cash-on-cash
What this calc doesn’t model
Holding costs: property taxes, insurance, utilities, HOA — typically $300-1,000/mo on a flip property. Add to your model separately.
Sale-side costs: the 8% used here covers realtor commissions (~6%) + closing fees (~2%). Vary by state.
Rehab overruns: almost universal. Plan for 10-20% over budget. The 70% rule (don’t pay more than 70% of ARV minus rehab) builds margin for surprises.
Time risk: flips that take longer than planned eat profits fast at hard-money rates. The single biggest risk factor in flipping.
Tax treatment: flip profits are usually short-term cap gains (ordinary income rates) for non-dealers, or ordinary income for dealers (if you flip regularly). Net of self-employment tax.
Hard money is for experienced operators who know their market and have a clear exit (sell or refi to long-term). For first-timers, consider partnering with someone who’s done it before.