How to Finance 100% of a Fix and Flip with Zero Money Down

Understanding the Financing Stack

Fix and flip investors traditionally need to bring 10-25% of the purchase price to the table as a down payment. However, by layering two financing products—hard money and gap funding—you can eliminate this upfront capital requirement entirely and get 100% for your Fix and Flip Real Estate Deal.

Hard money loans are short-term, asset-based loans from private lenders designed specifically for fix and flip projects. These loans typically cover 80-90% of the purchase price and 100% of renovation costs, with terms ranging from 6-12 months and interest rates between 6-12%.

Gap funding (also called down payment assistance or bridge equity) covers the remaining 10-20% that hard money lenders require as your skin in the game. Gap lenders essentially partner with you on the down payment, charging their own interest rate and points for this service.

The Step-by-Step Process

Step 1: Find a Profitable Deal

Before approaching any lender, you need a property where the numbers work with expensive money. Run your analysis using these elevated carrying costs:

• Hard money interest: 6-12% annually
• Gap funding fee: 2-4% of the gap amount plus monthly interest
• Combined holding costs that may reach $3,000-$5,000 monthly on a $200,000 purchase

The deal must have sufficient spread. A good rule of thumb: your After Repair Value (ARV) should be at least 35-40% higher than your all-in costs to accommodate these financing expenses and still generate profit.

Step 2: Secure Hard Money Pre-Approval

Contact hard money lenders and get pre-qualified. You’ll need to provide:

• Details about your experience (first-time flippers may face more scrutiny)
• The property address and purchase price
• Your estimated rehab budget and scope of work
• Comparable sales supporting your ARV

The hard money lender will order an appraisal and review your renovation plan. They’ll typically offer 90% of the lower of purchase price or as-is value, plus 100% of the approved rehab budget held in a draw schedule.

Step 3: Arrange Gap Funding

Once your hard money is approved, approach gap funding sources. These include:

Specialized gap lenders who work directly with hard money lenders and understand this financing model. They’ll charge 12-18% annual interest plus 2-4 points upfront on the gap amount.

Private money partners who may accept a percentage of profits instead of fixed interest rates.

Joint venture partners who contribute the down payment in exchange for 25-50% of the net profit.

The gap funder will review your hard money commitment letter and the deal financials to ensure their position is protected.

Step 4: Coordinate the Closing

This is where timing and coordination matter. Both lenders need to fund simultaneously at closing:

• Your title company or attorney must be experienced with dual-lender closings
• The hard money lender wires their 90% of purchase price
• The gap funder wires their 10% portion
• You bring only closing costs (typically $2,000-$4,000 for inspections, appraisal, title fees)

Some investors negotiate these closing costs into their loan amounts as well, achieving truly zero out-of-pocket financing.

Step 5: Execute the Renovation

With 100% of your purchase and rehab budget funded, you’ll draw from the hard money lender’s renovation holdback as work progresses. Most lenders require:

• Licensed and insured contractors
• Draw inspections before releasing funds
• Proof of work completion with invoices and lien waivers
• A final draw only after passing municipal inspections

Stay on schedule. Every extra month costs you interest to both lenders—potentially $4,000-$6,000 in carrying costs on a typical deal.

Step 6: Exit Strategy and Repayment

Your exit happens when you sell the renovated property. At closing:

• The hard money loan is paid off first (first lien position)
• The gap funding is repaid with interest and fees
• Selling costs (6-8% of sale price) come out
• You keep the remaining profit

Timeline is critical. Most hard money loans have 6-12 month terms. Extensions are available but expensive (often 1-2% of loan amount monthly). Plan for a 4-6 month project to allow buffer time for market conditions and unexpected delays.

Real-World Example

Purchase Price: $180,000
Rehab Budget: $50,000
ARV: $310,000
Hard Money Loan: $162,000 (90% of purchase) + $50,000 (100% rehab) = $212,000
Gap Funding Needed: $18,000 (10% of purchase)

Costs:

• Hard money: 11% interest, 2 points = $4,240 in points + $1,948/month
• Gap funding: 15% interest, 3 points = $540 in points + $225/month
• Total monthly carry: $2,173
• 6-month project total interest: $13,038 + $4,780 in points = $17,818

Sale proceeds at $310,000:

• Less loan payoffs: $230,000
• Less financing costs: $17,818
• Less selling costs (7%): $21,700
• Net profit: $40,482

The Pros and Cons

Advantages:

Capital preservation. You can complete multiple deals simultaneously without tying up your own money in down payments.

Speed and flexibility. Hard money lenders close in days, not weeks, allowing you to compete with cash buyers.

Learning opportunity. New investors can enter the business without accumulating massive savings first.

Disadvantages:

Higher costs eat into profits. You’re paying premium rates to both lenders, which can reduce your net by $15,000-$25,000 per deal compared to traditional financing.

Compounding risk. If the project stalls or the market softens, you’re burning expensive money on both loans simultaneously.

Smaller safety margin. With 100% leverage, there’s no equity cushion if your ARV estimate was optimistic or you encounter unexpected rehab costs.

Is 100% Financing Right for You?

This strategy works best for:

• Investors with limited capital but strong deal-finding abilities
• Experienced flippers who can accurately estimate costs and timelines
• Markets with strong appreciation and quick sale times
• Deals with significant value-add potential (30%+ ARV spread)

It’s less suitable for:

• First-time flippers still learning to estimate rehab costs
• Properties requiring extensive structural work or long timelines
• Soft markets where days-on-market average 90+ days
• Marginal deals with thin profit margins

Key Takeaways

Combining hard money and gap funding creates a powerful tool for scaling your fix and flip business without depleting your capital reserves. The key is finding deals with enough meat on the bone to support the elevated financing costs while still generating attractive returns.

Run conservative numbers, build relationships with reliable lenders, and maintain strict project timelines. When executed properly, 100% financing allows you to turn one deal into three or four simultaneous projects—dramatically accelerating your path to building a profitable real estate investment business.

The expensive money is temporary, but the lessons learned and momentum gained from completing more deals can compound into long-term success. Just remember: leverage is a tool that amplifies both gains and losses. Use it strategically, not recklessly.