Overview
Fix-and-flip, BRRRR, and new construction projects all take real capital to fund, more than most investors want to tie up in a single deal. Real estate is an expensive industry to start a business in: once you factor in purchase price, rehab costs, and holding costs, it's easy to need well over $200,000 to fund a single flip project.
That's where hard money, DSCR, and new construction loans come in, financing products built specifically for real estate investors and underwritten around your deal rather than your personal income. This lesson compares all three, so you can see which one fits your project, then points you to a full deep-dive on whichever one applies to you, and to a vetted lender who can fund it.
(Weighing whether to use financing at all versus your own cash? Cash vs. Other People's Money covers that decision first.)Key Takeaways
- Hard money (bridge) loans are the standard financing tool for fix-and-flip and the acquisition/rehab phase of a BRRRR, offering fast closings and deal-based underwriting.
- DSCR loans come into play once you're ready to hold a property as a rental, qualifying based on the property's rental income rather than your personal income.
- New construction loans finance both land and a phased construction budget for ground-up builds, releasing funds through milestone-based draws.
- Your exit strategy determines your loan stack. A flip usually needs one loan. A BRRRR typically needs two, a bridge loan to acquire and rehab, then a DSCR loan to refinance and hold.
- The lender you choose matters as much as the loan itself. Use the FlipperForce Lender Partner Network to find vetted lenders by state, and always verify a new lender before sending any money.
Loans for Real Estate Investors
These are loan products built specifically for real estate investors and typically underwritten around the deal itself, whether that's a property's after-repair value, its rental income potential, or a construction budget, rather than around your personal income and credit alone.
A quick note on terminology:
You'll often hear "hard money" used as shorthand for this entire category of private, deal-based lending, since the same companies frequently offer all three products below. But strictly speaking, "hard money loan" and "bridge loan" usually refer specifically to short-term fix-and-flip financing. DSCR and new construction loans come from the same private-lending world and are underwritten the same asset-based way, but they're distinct products built for different situations, not just another name for a hard money loan.
Which one you need depends less on which lender you like and more on your exit strategy:
| Your Strategy |
Loan You Need |
Why |
| Fix & Flip | Hard Money / Bridge Loan | Short-term, interest-only financing that covers purchase and rehab, paid off when the property sells. |
| BRRRR | Hard Money, then DSCR | A bridge loan funds the acquisition and rehab, then you refinance into a DSCR loan once the property is rent-ready to hold long-term. |
| Buy-and-Hold Rental (No Rehab) | DSCR Loan | If there's no rehab phase, you can go straight to a DSCR loan, qualifying based on the property's rental income. |
| Ground-Up New Construction | New Construction Loan | Finances land and a phased construction budget, released through milestone-based draws as the build progresses. |
Not sure hard money is the right category for you at all? Skip ahead to
Alternative Ways to Fund Your Flip for options like local banks, private money, and HELOCs.
Fix-and-Flip Hard Money Loans
Hard money lenders specialize in providing loans for flippers and real estate investors, which is why hard money lenders are often the best option for funding your rehab projects. Hard money lenders provide investor-friendly, short-term loans for fixer-upper properties that conventional lenders typically avoid, and can generally close within 7 to 14 days, which makes your offers more competitive and appealing to home sellers.
Hard money loans are underwritten around the deal itself rather than your personal financials, and rehab funds are released through draws as work is completed rather than handed to you upfront at closing.
Pros of Hard Money Loans
- Easier Underwriting Requirements (than Conventional) - Hard Money Lenders can lend on fixer-upper properties that Traditional Lenders typically avoid.
- Investor Friendly Loan Terms - Hard Money Lenders provide short-term (6 to 12 Months), interest only loans that are perfect for quick fix-and-flip projects.
- Potentially Larger Loan Amounts/Less Money Out of Pocket - Some Hard Money Lenders offer financing for the Purchase + Rehab, or lend a up to 80% of the ARV. In some circumstances you may need very little money out of pocket if the HML Terms are generous.
- Deal Based Lending - Instead of lending based upon the Borrower's financials, often times Hard Money Lenders will lend based upon the numbers of the deal so they can lend to borrowers with sub-par credit.
- Fast Closing - Hard Money Lenders can close and provide funding within 7 to 10 days of the purchase agreement.
Cons of Hard Money Loans
If not managed correctly, hard money loans can be costly. Typically, borrowers will make monthly interest-only payments with a balloon repayment of the principal at the term’s end. It is critical to carefully consider the optimum loan period for your project. Borrowers must accurately assess their property’s After Repair Value and thoroughly research local market conditions to be confident they can pay the loan back on time, avoiding additional penalties or possible Default.
The interest rates on a hard money loan are higher than a conventional bank loan. Most borrowers will pay between 8% and 14% for a hard money loan, although it could be higher or lower depending on the borrower’s experience, the value of the property and other considerations. The loan-to-value ratio for hard money loans also tends to be more conservative than for traditional loans. Lenders want to be sure they’ll recoup their investment, so the loan-to-value ratio may only be as high as 70% of the value of the property.
- Relatively Expensive - Hard Money Loan terms are typically the most expensive loans available on the market at 9 to 12% interest & 1 to 3% points upfront.
- Paperwork/Documentation - Relative to Cash closings, Hard Money Lenders will require additional paperwork upfront for closing and project documentation during the rehab.
- Loan Draws - Unfortunately, Hard Money Lenders do not give you all of the money upfront. Your HML will require you to submit a Loan Draw request that includes Contractor Invoices, Lien Releases & Proof of Completed Work in order to receive your Loan Draw.
Reality check
Hard Money Lenders may seem like an expensive option, but HMLs provide investor friendly terms & fast closings that Traditional Lenders cannot match. For this reason, you should strongly consider building relationships with Hard Money Lenders in your area that you can use to fund your rehab projects.
For the full breakdown, including typical loan limits, rates and points, borrower qualification tiers, the underwriting timeline, and exactly how the draw process works with real numbers, see
Fix-and-Flip Hard Money Loans: Terms, Draw Process & What to Expect.
Explore our Lender Network of 50+ Hard Money Lenders
DSCR Rental Loans
If your exit strategy is to refinance into a long-term rental rather than sell, a Debt Service Coverage Ratio (DSCR) loan is the financing tool built for that step. DSCR loans are especially common at the end of a BRRRR project, where a flipper rehabs a property with short-term bridge financing, then refinances into a DSCR loan to hold the property as a rental.
Unlike a conventional mortgage, a DSCR lender doesn't evaluate your personal income or debt-to-income ratio. Instead, they qualify the loan based on whether the property's projected rental income covers the mortgage payment. This makes DSCR loans a popular option for investors who are self-employed, hold multiple properties, or simply don't want to document years of personal tax returns for every rental they acquire.
Pros of DSCR Rental Loans
- No Personal Income Verification - Qualification is based on the property's rental income covering the debt payment, not your W-2s or tax returns.
- Scale Without DTI Limits - Since DSCR loans aren't underwritten against your personal debt-to-income ratio, you can hold multiple financed rentals without hitting the limits a conventional lender would impose.
- Long-Term, Fixed Terms - Most DSCR loans offer 30-year fixed or adjustable terms, giving you a stable long-term hold instead of a short-term balloon.
- Close Under an LLC - DSCR loans are typically closed in the name of a business entity, which supports the same LLC structure you likely already use for your flips.
Cons of DSCR Rental Loans
- Rental Income Must Cover the Payment - If the property's projected rent doesn't comfortably cover the mortgage, you may need a larger down payment or a lower loan amount to qualify.
- Higher Rates Than Conventional - DSCR rates typically run higher than a conventional owner-occupied mortgage, since the lender is taking on investment property risk.
- Prepayment Penalties - Many DSCR loans include a prepayment penalty period, so check the terms carefully if you may sell or refinance again within the first few years.
Reality check
DSCR loans are the bridge between "flipper" and "landlord." If any part of your business plan includes holding properties as rentals instead of selling every deal, understanding how a DSCR lender evaluates a property before you buy it will save you from getting stuck mid-BRRRR with a property that won't cash flow enough to refinance.
Running a BRRRR? The timing of this refinance, seasoning periods, DSCR ratio calculations, rate lock timing, and what to do if your bridge loan matures before the refinance closes, is covered in full in
DSCR Loans & the BRRRR Refinance: What to Know Before You Refi.
Ground-up New Construction Loans
If you're building a spec home, a townhome development, or an infill multi-family project rather than rehabbing an existing structure, you'll need a construction loan rather than a standard fix-and-flip bridge loan. Ground-up construction lending works differently from a rehab loan because there's no existing structure to base the initial valuation on, so the lender is financing both the land and a phased construction budget.
Pros of New Construction Loans
- Funds Land and Vertical Construction - Construction lenders can finance both the land acquisition and the build itself, rather than requiring you to own the lot outright first.
- Milestone-Based Draws - Funding is released in stages as construction hits agreed milestones (foundation, framing, mechanicals, finishes), which keeps your cash tied directly to project progress.
- Higher Total Leverage on Bigger Projects - Because these loans are structured around a full project budget, experienced builders can often finance a larger percentage of total project cost than they could piecing together financing themselves.
Cons of New Construction Loans
- Stricter Experience Requirements - Lenders generally want to see prior ground-up or major renovation experience before approving a construction loan, more so than for a standard rehab flip.
- Longer Terms, More Oversight - Builds typically run 12 to 24 months with regular inspections tied to each draw, which means more ongoing documentation than a typical fix-and-flip bridge loan.
- Budget Overruns Are Costly - Because draws are milestone-based, cost overruns or delays can create cash flow gaps between when you owe your contractors and when the next draw is released.
Pro Tip
If new construction is part of your business plan, build your draw schedule directly into your project timeline in the
FlipperForce Scheduler before you close. Lenders want to see a realistic milestone schedule, and having one ready speeds up underwriting.
Finding a Lender You Can Trust
Whichever financing option fits your deal, the lender you choose matters as much as the loan structure itself. A reliable lending partner closes on time, communicates clearly, and doesn't disappear mid-project when you need a draw released.
The
FlipperForce Lender Partner Network is a directory of vetted hard money, DSCR, and new construction lenders actively funding deals across the country, filterable by state so you can find lenders who know your local market. Before you reach out to any lender, whether you find them through FlipperForce or on your own, read
How to Verify a Hard Money Lender Is Legit so you know exactly what to check before you send a deposit or sign anything.
Not Ready for Hard Money?
Hard money, DSCR, and new construction loans are the standard tools for active real estate investors, but they aren't the only way to fund a deal. If you're just getting started, don't yet qualify for investor-specific financing, or simply want to explore lower-cost options like local banks, private money from your network, or tapping into home equity, read
Alternative Ways to Fund Your Flip for a full breakdown of options outside the hard money space.
If you're more interested in negotiating directly with a seller,
Seller Financing & Creative Financing Strategies covers owner-carry, subject-to, and other structures worth knowing, especially useful when market rates are elevated.
