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Fix-and-Flip Financing in 2026: Hard Money & 70% Rule

Fix-and-flip investors can’t use a standard mortgage. Flippers use hard money: short-term, higher-rate loans based on after-repair value (ARV), not income. Core discipline: the 70% rule — pay no more than 70% of ARV minus repairs (a $400K-ARV home needing $50K = $230K max). The buffer covers financing, holding, selling costs, and profit. Overruns are the top failure mode. Backup: refinancing and renting converts a flip into a BRRRR. Own Luxury Homes® 12-Point Agent Integrity Audit™ — we model both exits.

Fix-and-Flip Financing in 2026: Hard Money, the 70% Rule, and How Flippers Fund Deals

The direct answer: Fix-and-flip investors usually can’t use a standard mortgage — banks won’t finance a property needing major work, and flips move too fast for conventional timelines. Instead, flippers use hard money loans: short-term, higher-rate loans based on the property’s after-repair value (ARV) rather than your income. The discipline that keeps flippers profitable is the 70% rule — don’t pay more than 70% of the ARV minus repair costs. The risks are real: high financing costs, renovation overruns, and a market that can shift before you sell.

Hard money funds most flips — fast, short-term, ARV-based

Hard money loans are short-term (often 6–18 months), higher-rate loans from private lenders, underwritten primarily on the property’s after-repair value rather than your personal income; they fund quickly — essential when competing for distressed properties — and cover much of the purchase and rehab; the speed and flexibility come at a cost: higher rates and points than conventional loans

The 70% rule: the flipper’s core discipline

The classic guardrail: don’t pay more than 70% of the after-repair value, minus estimated repair costs; example — a home with a $400,000 ARV needing $50,000 in repairs: 70% of $400,000 = $280,000, minus $50,000 repairs = a $230,000 maximum purchase price; the 30% buffer covers financing, holding costs, selling costs, and profit; paying above this rule is how flips lose money

Holding costs eat profit — speed matters

Every month you hold a flip, you pay interest on the hard money, plus taxes, insurance, and utilities; a rehab that drags from three months to six can erase a chunk of your profit; experienced flippers budget conservatively for both the renovation timeline and cost, because overruns on either are the most common reason a flip underperforms

Exit options: sell, or refinance and hold (the BRRRR pivot)

Most flips end in a sale, but if the market softens or the numbers favor holding, you can refinance the finished property into a conventional or DSCR loan and rent it out — effectively converting the flip into a BRRRR; having a backup exit protects you if the resale market shifts during your rehab; always know both your sell and your hold numbers before you buy

How Flippers Fund and Protect a Deal

The Hard Money Reality

Hard money is the engine of most flips, and it works very differently from a mortgage: approval is fast (days, not weeks) and based on the deal, not your tax returns; terms are short (you’re expected to be in and out in months); and the cost is high (higher rates plus upfront points). That cost is acceptable because the loan is short-term and the profit comes from the resale, not from holding cheaply. The danger is treating hard money like a mortgage — if your rehab and sale drag on, the expensive short-term debt becomes a serious drag on returns.

Why the 70% Rule Protects You

The 70% rule isn’t arbitrary — it bakes in a margin for everything that goes wrong: financing costs, longer-than-planned holding periods, the 7–10% it costs to sell, and unexpected repair surprises. When you pay 70% of ARV minus repairs, that remaining 30% is your buffer and your profit. Pay more — because you fell in love with the property or got into a bidding war — and you’re eating into the margin that was supposed to be your return. Disciplined flippers walk away from deals that don’t pencil at 70%, and that discipline is exactly what keeps them in business.

“"I want to flip houses. How do people actually pay for them — you can’t exactly get a normal mortgage on a wreck." Exactly right — and that’s the first thing to understand. Banks won’t touch a property that needs major work, so flippers use hard money: fast, short-term loans based on what the house will be worth fixed up, not on your income. It’s expensive — higher rate, points up front — but it’s short-term and it closes fast. Now, the rule that keeps you from losing your shirt: never pay more than 70% of the after-repair value, minus your repair budget. On a house that’ll be worth $400,000 fixed up, needing $50,000 of work, that’s a $230,000 max purchase price. That 30% gap is your buffer for financing, holding costs, selling costs, and profit. And always know your backup: if the market shifts mid-rehab, can you refinance and rent it instead? Flip with that discipline and the math works. Break the 70% rule because you love the house, and it usually doesn’t.”

— Ryan Brown, Principal Broker & CEO, Own Luxury Homes®

How do you finance a fix-and-flip?

Fix-and-flip investors usually can’t use a standard mortgage — banks won’t finance a property needing major work, and flips move too fast for conventional timelines. Instead, flippers use hard money loans: short-term (6–18 months), higher-rate loans from private lenders, underwritten on the property’s after-repair value (ARV) rather than your income, and funded fast. The core discipline is the 70% rule: don’t pay more than 70% of the ARV minus repair costs — e.g., a $400,000-ARV home needing $50,000 of repairs has a $230,000 max purchase price, with the 30% buffer covering financing, holding, selling costs, and profit. Holding costs (interest, taxes, insurance) eat profit, so speed matters — overruns on rehab cost or timeline are the most common reason flips underperform. Always know your backup exit: refinancing the finished property into a conventional or DSCR loan and renting it converts the flip into a BRRRR if the resale market shifts.

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Own Luxury Homes® — we run flips at the 70% rule with both sell and hold exits modeled. 12-Point Agent Integrity Audit™. Analyze a flip the disciplined way ›

"The introduction Own Luxury Homes® makes is to a specialist with documented closing history in your specific market — not the county, not the metro, the submarket you're actually selling or buying in. That's the standard we verify before your name goes anywhere."

— Ryan Brown, Principal Broker & CEO, Own Luxury Homes® (FL License BK3626873)