Every flip in Louisville and Southern Indiana runs into the same wall eventually: the bank. A traditional 30-year mortgage is built to finance a home someone is going to live in for years, underwritten on your personal income and credit, and funded in a single lump sum at closing. None of that matches how a flip actually works — you need money fast, for a property that may not even be livable yet, released in stages as work gets done, for a loan you plan to pay off in months, not decades.

That mismatch is why fix-and-flip financing is its own world, built around hard money and bridge lenders instead of conventional banks. This guide walks through how that financing stack actually works in 2026 — the ARV math lenders use to size your loan, what draws are and how they're released, what it really costs right now, and where flips most often die financially before they ever hit the market.

How a fix-and-flip loan actually works

A fix-and-flip loan is a short-term, asset-based loan — usually called hard money or a bridge loan — secured by the property itself rather than primarily by your income or credit score. Terms typically run 6 to 18 months, long enough to close, renovate, and sell (or refinance) before the loan matures. Because the lender is underwriting the deal more than they're underwriting you, approval and closing move fast: often 7 to 10 days from application to funding, sometimes faster if your paperwork and inspections are ready to go.

The tradeoff for that speed is cost and structure. Most hard money lenders want 20-30% down (some flip loans fund closer to 70-75% of purchase price), charge 1 to 5 origination points up front, and carry interest rates that run well above a conventional mortgage — more on exact numbers below. The property is the collateral, which means a flip that stalls doesn't just cost you profit, it puts the asset itself at risk.

The 70% ARV rule

Hard money lenders size a fix-and-flip loan around After-Repair Value (ARV) — what the property will be worth once the renovation is done — not the purchase price alone. The industry's long-standing rule of thumb is that total financing (purchase plus rehab) shouldn't exceed roughly 70% of ARV, leaving room for the lender's margin of safety and your own profit after selling costs.

In practice that means your maximum loan amount is calculated as: (ARV × 0.70) − estimated rehab cost = maximum purchase-price financing. Get the ARV wrong — by pulling comps that are too good, too far away, or not actually comparable in condition and square footage — and the whole deal's math falls apart before you've swung a hammer. This is one of the biggest reasons investors lean on a local agent who pulls real, defensible comps rather than an online estimate: an ARV that doesn't survive scrutiny from your lender's own appraiser can blow up financing mid-deal.

How rehab draws actually get released

Hard money lenders don't hand you the full rehab budget at closing. Instead, renovation funds are held back and released in draws — disbursements tied to completed, inspected work. A typical structure: you fund the first phase of work out of pocket (or from your down payment), request a draw once that phase is done, the lender sends an inspector to verify the work, and funds release a few days later. This repeats through the project, often in 3 to 6 draws depending on the scope of the rehab.

This protects the lender from funding work that never happens, but it also means you need cash flow to carry each phase before reimbursement arrives — inspection delays, contractor scheduling, and paperwork can all slow a draw down by days or weeks. Budgeting for that lag, not just the total rehab cost, is part of financing a flip correctly.

What it actually costs right now

Rates and points move with the broader lending market, but as of 2026, typical ranges for residential fix-and-flip hard money loans look like this:

• Interest rate: roughly 9–12% for experienced borrowers with a solid project, up to the mid-teens for a first flip or a thinner deal.
• Origination points: 1 to 3 points on a typical residential flip loan (1 point = 1% of the loan amount), sometimes up to 5 on higher-risk deals.
• Loan-to-ARV: most conservative lenders cap total financing around 70–75% of after-repair value.
• Down payment: often 20–30% of purchase price, on top of the points and fees due at closing.
• Term: 6 to 18 months, matched to how long the renovation and resale (or refinance) realistically takes.

Run the full cost — interest over the expected hold period, points, closing costs, and carrying costs like insurance, utilities, and property taxes — against your projected resale price before you commit. A deal that pencils on purchase price and rehab budget alone, without the financing cost layered in, isn't actually a deal yet.

The exit: sell, or refinance into a DSCR loan

Every fix-and-flip loan needs an exit plan before you close on the property, because the loan's short term means the clock starts immediately. There are two realistic exits: sell the renovated property on the open market (the classic flip), or refinance into a longer-term rental loan and hold it instead — a pivot more investors are making as rents in Louisville and Southern Indiana have stayed strong. If the plan shifts from sell to hold, a DSCR loan is the natural landing spot: it qualifies off the property's rental income rather than your personal income, which is exactly the kind of lender a flip-to-rental conversion needs. Investors scaling past their first few deals with this hold-instead-of-sell approach are often running the BRRRR method in everything but name.

Whichever exit you plan for, know your number going in: the sale price (or refinance appraisal) you need to hit to pay off the hard money loan, cover selling costs, and still walk away with the margin that made the deal worth doing.

Where flips actually die

Most fix-and-flip losses don't come from one catastrophic mistake — they come from several small miscalculations stacking up. The most common:

• Thin margins from the start. Not confirming, before closing, that the projected profit actually covers interest, points, fees, and holding costs — not just purchase price plus rehab.
• Optimistic rehab budgets with no buffer. Renovation delays and surprise repairs (foundation, electrical, plumbing behind old plaster) are the rule in older Louisville and Southern Indiana housing stock, not the exception.
• Letting the timeline slip. A 6–18 month hard money loan racks up interest every month it's outstanding — a two-month delay can erase a meaningful chunk of profit.
• No real exit plan. Going into a deal without deciding whether you're selling or refinancing — and under what conditions you'd switch — leaves you reacting under pressure instead of executing a plan.
• Rushing the ARV. Pressure to close fast can mean skipping a real comp pull in favor of an optimistic online estimate, which shows up as a financing shortfall the moment the lender's appraiser disagrees.

Sourcing the deal right in the first place matters just as much as financing it right — a flip bought at the wrong price can't be rescued by good financing terms. Off-market deal flow, where there's no competing-offer bidding war pushing the purchase price toward retail, is where a lot of the real margin in a flip actually comes from; see our guide to Louisville off-market deals and wholesaling for how investors find those before they hit the MLS.

The trade-offs

• Speed and access, for a price. Hard money closes in days, not the 30-45 days a conventional loan takes, and it doesn't require the W-2 income and debt-to-income underwriting a bank does — but you pay for that access in rate and points.
• No long-term relationship, no long-term cost. The loan is built to be paid off in months, so you're not locked into a high rate for 30 years — but that also means there's no room for the project to drift.
• The property is the collateral. A flip that goes sideways doesn't just cost you the projected profit; in a worst case, it puts the asset itself at risk if you can't pay off or refinance the loan at maturity.
• Draws protect the lender, and discipline you. Staged funding means you can't get ahead of yourself on spending — but it also means you need your own cash flow to carry each phase of work before reimbursement comes through.

Frequently asked questions

Can I get a fix-and-flip loan with bad credit?

Often yes, since hard money lenders weight the deal and the collateral more heavily than your credit score — but a weak credit profile usually still means a higher rate or more points, and most lenders want to see some track record or a solid down payment to offset the risk.

How much cash do I actually need to start a flip?

Beyond the down payment (often 20–30% of purchase price), budget for points, closing costs, and enough cash reserve to carry the first phase of rehab before your first draw is reimbursed — running out of cash mid-project is one of the most common ways a flip stalls.

What happens if I can't sell before the loan matures?

Most hard money lenders will discuss an extension (usually for an additional fee) if the project is close to done, and refinancing into a longer-term loan — like a DSCR loan if you decide to hold the property as a rental instead — is the other common path. Going into the deal without a plan for this scenario is one of the costliest mistakes a flipper can make.

Is a hard money loan the same as a DSCR loan?

No. A hard money loan is a short-term purchase-and-rehab loan sized around after-repair value, built for a flip or quick turnaround. A DSCR loan is a longer-term rental loan sized around the property's rental income, built for buy-and-hold. Many investors use one to buy and renovate, then the other to refinance and hold.

If you're underwriting a flip and want a second set of eyes on the ARV, the comps, or whether the numbers actually support the financing cost, reach out to Rob — that's exactly the kind of deal math we walk through with investors before they're locked into a purchase.