How to Finance a Fix and Flip

Financing a rehab is the minority route, not the default one. In ATTOM’s Q1 2026 report, 61.1 percent of flipped homes were purchased with all cash — so roughly two in five involved borrowing of some kind, and the routes differ from one another in structure rather than in price alone.

What follows is the shape of each route, and what a lender tends to want once one is chosen.

Cash is the baseline the other routes argue against

Because most purchases are outright, the financed ones are usually financed for a reason: the buyer wants to hold less capital in one building, or wants to run more than one project, or does not have the full purchase and rehab sum sitting idle.

That framing matters because it sets what a lender is actually pricing. A lender writing against a house that is about to be taken apart is lending against a plan and a building in a condition nobody wants to own at the halfway point. Everything unusual about rehab lending follows from that single fact.

Asset-based lending, where the building is the case

The first class goes by several names, and the common thread is that the decision rests more on the property and the plan than on the borrower’s income documentation. Terms are written to run in months rather than years, the loan is expected to be repaid from a sale or a refinance rather than from earnings, and the paperwork is lighter in some places and heavier in others — lighter on income, heavier on the scope of work.

The practical consequence is that the schedule is part of the product. A loan written to be repaid on resale has an opinion about how long resale takes.

That opinion shows up in the conditions rather than the headline. Extensions, where they exist, are usually available on terms set out in the documents; the interesting question is not whether an extension is possible but what it requires, because the same event that delays a build — a failed inspection, a supply gap, a trade that does not appear — tends to delay every other clause keyed to the same calendar. The insurance term is one of those clauses, and it does not extend itself.

There is a second consequence that catches people. Because the decision rests on the building and the plan, the lender’s diligence lands on documents the borrower may not have produced before: a written scope, a realistic sequence, and some evidence of who is doing the work. Assembling those late is the most common reason a straightforward file takes weeks longer than anyone planned.

Private arrangements between people who know each other

The second class is money from an individual rather than an institution — often someone who has done this before, sometimes a family arrangement. The structures vary too much to generalize, which is exactly the risk: the terms are whatever the documents say, and the documents are frequently shorter than institutional ones.

Two things are worth the same care here as anywhere else. The security interest has to be recorded properly, and the insurance has to name whoever holds that interest. An informal arrangement does not make the second point informal.

The failure mode here is specific: because the parties trust each other, the paperwork that protects them both gets deferred. A private lender who is not named on the policy is, at the moment of a loss, a person with a claim against the borrower rather than an interest in the building. That is a materially worse position than the one they believe they hold, and it is discovered at the worst possible time.

Borrowing against a house already owned

A third route does not involve the project at all: the borrower raises money against equity in a property they already hold. The Consumer Financial Protection Bureau’s explanation of a home equity loan sets out the basic shape — money borrowed against equity, with the home as collateral, received as a lump sum, and with foreclosure as the consequence of not repaying.

The mechanic worth noticing is which building carries the risk. The money is secured on the house the borrower already owns, while the work happens somewhere else entirely. Those are two different buildings, two different policies, and two different sets of conditions, and confusing them is easier than it sounds.

Purchase loans that expect the work

A fourth class is a mortgage that anticipates renovation rather than ignoring it, with funds for the work held back and released as it proceeds. The arrangement resembles a draw schedule bolted onto a purchase loan.

These come with more process, not less: an agreed scope, inspections between stages, and conditions about who may perform the work. Whether any given program is available for a particular use is a question for the lender and the program’s own rules, and not one an article can settle.

Bringing in a partner instead of a lender

The last route replaces debt with someone else’s capital in exchange for a share. It changes the insurance conversation more than people expect, because it changes who has an interest in the building. A party with an economic stake generally wants to see that stake reflected somewhere, and the certificate they are handed is frequently misread as doing that — which is the whole subject of what a certificate does not do.

What a lender asks for that is not about money

Across every route above, the same three requests recur.

A scope of work. Not a budget — a description of what will be done to the structure. It drives the draw schedule, and it also decides which policy form answers, because a dwelling form written around a finished, occupied house behaves differently once the building is open and empty. Whether the work is cosmetic or structural is the whole question, and it decides whether builders risk or something narrower like a cosmetic repair endorsement is the right instrument.

A draw schedule. Money released against progress. It means the amount at risk in the building changes over the life of the project, which is precisely the situation a limit that moves during a rehab describes — a policy condition expressed as a ratio behaves differently from one expressed as a sum when the building’s value is climbing weekly.

Naming on the policy. The lender expects its interest recorded on the property policy in its own right. What that naming is called varies by form and by loan document, and the loan document is the authority on which wording it requires.

Real-World Scenario: A file is ready to close on a Friday. The scope is agreed, the draw schedule is signed, and the lender’s conditions list one line about property coverage naming it on the policy. The buyer forwards a certificate from the policy on the house they already own — the one the equity was drawn against. It is a real policy, correctly issued, naming the right party. It also describes a different building in a different condition several miles away. Nobody involved has done anything wrong, and the closing still moves, because the document that was needed described the wrong structure. The conversation that would have prevented it happens when the scope is drafted, not when the date is set.

The order things happen in

The sequence is the part most often run backwards. Evidence of coverage is typically a condition of funding, so the policy is arranged before the money moves rather than after. Where a loan uses an escrow arrangement, the Consumer Financial Protection Bureau notes that many lenders require taxes and insurance to be paid through it so the bills are certain to be paid — another reason the insurance question arrives earlier in the file than people expect.

Timing runs longer than the plan too. The typical flip took 165 days from purchase to resale in that same Q1 2026 report. A loan term, a policy term and a build schedule that each assumed a faster finish will all reach their edges at roughly the same moment, and the occupancy question that ends cover early is the subject of completion triggers.

What to have ready before the first call

Three documents make every version of this conversation shorter: the scope of work, the expected timeline including the gap between purchase and the start of work, and the loan’s own insurance conditions in their original wording.

The status of the building during that gap matters more than it looks, because an empty house between closing and the first crew is a described condition with consequences of its own — the ground what vacant actually means covers, and a distinction the market you are working in does not change. For how the cover itself is built around a rehab, the fix and flip insurance overview is the place to start; what house flipping insurance covers goes a layer deeper into the individual parts. Have the scope and the lender’s exact wording to hand and we can work from those.