The decision in brief
The cash you need to flip a house equals your total project cost minus what the loan covers, plus reserves. Total cost includes purchase, closing, loan costs, rehab, holding, and selling costs. With a loan that funds most of the purchase and all of the rehab, your cash covers the rest of the purchase, fees, carrying costs, and contingency.
View Fix and Flip Loans →What is a capital stack on a flip?
The number on the loan approval isn't the number that matters. The number that matters is the most cash you'll have out at any one time.
The capital stack is every source of money in the deal, layered together. On a typical flip:
- Senior loan (fix and flip or hard money loan) covering part of the purchase and some or all of the rehab
- Your cash (equity) covering the rest
- Sometimes partner money, under a written agreement and disclosed to your lender
LTC (loan-to-cost) is the loan divided by project cost. ARV (after repair value) is the estimated value after renovation. Lenders limit both, and the limits vary by lender and by borrower experience. See Axelrad's fix-and-flip page for current program terms.
Capital stack example
Example (hypothetical numbers, not Axelrad terms): purchase $200,000, rehab $60,000, ARV $360,000, 7-month hold. Assumed leverage: 80% of purchase + 100% of rehab.
| Cost item | Total | Paid by loan | Paid by you |
|---|---|---|---|
| Purchase price | $200,000 | $160,000 | $40,000 |
| Rehab budget | $60,000 | $60,000 (in draws) | $0 (but see gap below) |
| Buy-side closing costs | $5,000 | $5,000 | |
| Loan points and fees (example) | $5,500 | $5,500 | |
| Interest, 7 months (example, draw-based) | $12,000 | $12,000 | |
| Taxes, insurance, utilities, 7 months | $4,900 | $4,900 | |
| Contingency (10% of rehab, your cash) | $6,000 | $6,000 | |
| Selling costs (paid from sale proceeds) | $25,200 | from proceeds | |
| Total | $318,600 | $220,000 | $73,400 cash before sale |
Check the ARV cap: $220,000 / $360,000 = 61%, inside a hypothetical 70% cap. So the purchase-price limit, not the ARV cap, is what binds here.
Why is your cash need higher than the down payment?
In the example, the down payment is $40,000, but cash out before sale is $73,400. The difference is closing costs, loan costs, interest, carrying costs, and the contingency. First-time flippers often budget only the down payment and end up short in month four.
What about the gap before rehab draws?
Draws usually reimburse completed work. If your contractor needs to be paid before a draw arrives, you'll front that money temporarily. In the example, if stage 1 costs $15,000 and the draw arrives after inspection, your peak cash need is $73,400 plus whatever is outstanding at that moment. The live Axelrad guide on cash to close and rehab draws explains why timing is part of the funding requirement.
How does experience change how much you need?
A lot, with many lenders. More experienced investors are often offered higher leverage, which shrinks their share of the purchase. Using hypothetical leverage levels on the same example:
| Hypothetical leverage on purchase | Purchase financed | Your purchase share |
|---|---|---|
| 80% | $160,000 | $40,000 |
| 85% | $170,000 | $30,000 |
| 90% | $180,000 | $20,000 |
These levels are illustrations, not Axelrad terms. Every loan is also subject to an ARV cap and to underwriting. Ask your lender what applies at your experience level.
Fill-in: total cash needed worksheet
Total cash out before sale equals your share of the purchase, plus your share of the rehab, plus closing costs, loan points and fees, interest, carrying costs and contingency, minus any earnest money already deposited. The cash you should have available adds the peak draw gap and an extra reserve on top.
Total cash needed
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Purchase
Rehab
Other cash out
Draw gap and reserve
Can you flip a house with no money of your own?
Rarely, and it's risky. Even with high leverage, most loans leave you paying closing costs, interest, and carrying costs. Some investors bring in a partner who supplies cash in exchange for a share of profit, under a written agreement drafted by an attorney. If an earnest money deposit is the one piece blocking a contract, Axelrad offers EMD funding separately so your rehab cash stays intact.
How do you lower the cash you need?
- Buy deeper below ARV so the ARV cap isn't binding
- Choose a lender and program where rehab is financed
- Negotiate seller credits for closing costs where allowed
- Shorten the hold to cut interest and carrying costs
- Stage contractor payments to match draws
When should you confirm your cash number with a lender?
Before you make an offer, not after you're under contract. Ask for terms on a sample deal in your buy box: what share of purchase and rehab would be financed at your experience level, what points and fees apply, how draws are released, and what the lender expects you to show in reserves. With those answers, your worksheet becomes a real number you can plan around.
Key takeaways
- Cash needed = total project cost - loan proceeds + reserves.
- Include closing, loan, interest, and carrying costs, not just the down payment.
- Plan for the peak cash need during draw gaps.
- Experience can change your purchase share by thousands of dollars.
Know your number before you offer
Run your own stack in the calculator on the fix-and-flip loan page, then submit your deal to see how it would be structured.
Frequently asked questions
How much down payment do you need for a fix and flip loan?
It depends on the lender and your experience. Leverage on the purchase price commonly leaves you funding the remainder, plus closing costs, interest, and carrying costs. Ask your lender what applies to your deal.
Can a fix and flip loan cover the whole rehab?
Some can. Many lenders release rehab funds in draws, subject to an ARV cap. Confirm the rehab coverage and draw process before you commit.
What costs do I pay out of pocket on a flip?
Typically the remaining purchase share, closing costs, loan costs, interest, taxes, insurance, utilities, contingency, and any work you pay for before draws.
How much should I keep in reserve?
Enough to cover several extra months of holding costs and a budget overrun. Calculate it from your own numbers.
Are selling costs paid out of pocket?
Commissions and seller closing costs are often paid from sale proceeds, but they reduce your profit and must be in your analysis.
Plan your next step
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