Flipping houses with hard money can be an effective investment strategy. It gives you the funding you need to get started repairing and selling homes.
According to a Gallup poll, around 37% of respondents consider real estate the best long-term investment. It sits right behind gold at around 23%.
Flipping houses also remains one of the more popular ways to start investing in real estate. According to ATTOM's U.S. Home Flipping Report, home flips represented around 7.4% of all home sales in 2024. The hardest part can be getting funding to get started, but hard money helps bridge that gap.
Why Flipping Houses With Hard Money Is an Effective Strategy
Flipping houses with hard money is the right choice in competitive markets or for properties that need significant repairs. It's also best if your credit score isn't high.
Hard money loans also have benefits over traditional ones. They have more flexible terms catered to your needs. They have speedy approval and funding. This means you can start using the money sooner.
At the same time, they have shorter repayment terms and higher interest rates.
How to Choose a Lender
No hard money lending guide would be complete without helping you choose the right lender.
Make sure they work in your state. They'll be easier to contact and understand the legal nuances of your area.
Most lenders will have a minimum loan-to-value (LTV) ratio they expect. Find out whether they base approval on LTV or ARV. This can be the difference between you getting the financing you need or not.
Find out what they approve. Some lenders may only approve loans for specific property types or price ranges.
Make sure that you find a lender with experience in hard money loans. Check their track record and reviews from past clients.
Find out the loan repayment requirements they expect. Check the terms, such as interest rates and repayment schedules, before you close on the loan.
How to Get a Hard Money Loan
Once you've found a lender, prepare an application. You'll need:
- Property details
- Renovation plan
- Financial information
You'll also need to present them with a clear investment strategy. Show them how the property is now and what you plan to do with it. This includes details such as:
- Property purchase price
- Renovation costs
- After renovation value (ARV)
Then, get a property appraisal. It'll tell you the property's actual value to determine the loan amount.
Finding a Property to Flip
Choosing the right location is one of the most basic investment property tips, but it's especially important with flipping because the property isn't move-in ready. The neighborhood becomes even more of a selling point, so look for one with high demand.
One of the best ways to determine if you have the right location is to do a market analysis. It'll help you understand local vacancy rates. You'll see the sales and rental rates of comparable properties, which will later help you set your own.
Try to pick a property that only needs cosmetic upgrades. It's too expensive and time-consuming to deal with major structural repairs.
How Long Do House Flips Usually Take?
The average house-flipping process takes around 157 days. That's from the beginning to the sale.
Closing on the loan only takes a few weeks. There are steps you can take to ensure your loan closes quickly.
Get pre-approved and send all the necessary paperwork over as soon as possible. Communicate with your lender in case they have any questions.
What Are Common Mistakes When Flipping?
There are many common reasons property flips fail.
There can be too much of a good thing when it comes to property improvements. Don't waste time or money on unnecessary changes. They won't provide a return on investment and could even steer buyers away.
One area that often gets ignored during flipping is the backyard and landscaping. Don't assume you can leave it alone because fewer people will see it. It's an important part of your property's curb appeal and overall value.
Many flippers also stop at improvements and ignore market analysis. They don't know what local buyers want. They don't compare it to similar homes. They don't analyse sales activity to find the right time to sell. Losing this data keeps you from personalizing the property and setting an attractive price.
It's also common to ignore inspections. These can help you spot red flags that would have steered you away from a money pit of a house, such as mold and structural issues.
Frequently Asked Questions
What's the 70% Rule?
The 70% rule is a guideline to help ensure profitable house flipping. It outlines how much you should spend on a house you plan to flip. It says you shouldn't pay more than 70% of a property's ARV minus repair costs.
This isn't a hard-and-fast rule, but it is one of the more effective real estate investing tips. It helps keep you on budget and avoid buying a lemon of a property that would cost too much to fix.
What Adds the Most Value When Flipping a House?
Certain house renovation strategies help add the most value to your home. Focus on the kitchen and bathrooms because they get the most use. The living room is also important.
According to storage company SquareFoot, the average American home is only around 1,800 square feet. Adding square footage can be expensive and time-consuming, but worthwhile. Consider it if comparable properties in the neighborhood are bigger.
Curb appeal is an underrated feature. The outside is the first impression buyers have of your property, so make sure it's positive.
Improving energy efficiency is also underrated. Adding better appliances can be a selling point, especially if the original ones were old and led to high energy bills.
Start Flipping Houses With Hard Money Today
Flipping houses with hard money is faster and works better for properties in less-than-ideal condition. It's an effective strategy if you find the right lender.
The Investor's Edge is an all-in-one fix-and-flip solution for investors. We have over 22 years in the business and over 200 five-star reviews.
Our goal is to help every investor lower risk and increase profit. Our proprietary software helps you find interested sellers, and our team of experts ensures you get a profitable deal.
We can also help you secure up to 100% funding. Schedule a free consultation today.
