First-Time Flippers: Before You Fund Your First Project
First-Time Flippers: Before You Fund Your First Project
THE SHORT VERSION. Most first projects do not go wrong at the closing table. They go wrong in the middle, when the budget runs thin, the timeline stretches, and the plan changes. Know your exit before you buy, build a rehab budget you can defend, understand how draws actually reach you, and treat your timeline as part of the cost. Below, we cover everything I wish I knew as a first-time borrower.
If you are looking at fix and flip loans in Maryland for your first project, you have probably already realized the financing conversation assumes you know things that often nobody ever explained. How draws work. What "100% financing" actually covers. Why a lender cares more about your exit than your purchase price.
We have funded more than 170 loans across Baltimore and the surrounding counties, and the first-time flippers who do well are not the ones with the most cash or the prettiest spreadsheet. They are the ones who understood the mechanics before they committed. Here is what that looks like.
1. Start With The Exit, Not The Purchase
New investors tend to work forward: what can I buy, what will it cost to fix, what might it sell for. Experienced investors work backward. They start with the exit and ask whether the deal still makes sense when they get there.
Your exit is either a sale or a refinance. Both have a timeline, a cost, and a market attached to them. If you are selling, what are comparable finished homes actually closing at right now, and how long are they sitting? If you are refinancing into a rental, what will that lender require, and will the property qualify once the work is done?
Decide how you plan to get out of the deal before you make the offer. If the numbers only work under perfect conditions, the deal may be too tight from the start.
2. The Rehab Budget Is More Important Than You Think
The purchase price is the number everyone negotiates. The rehab budget is the number that decides whether the project works.
A budget that is too thin is the single most common reason a first project stalls. It is not usually one big miss. It is a roof that needed replacing instead of patching, a panel that had to be upgraded, a plumbing stack nobody saw until the walls opened. Each one is survivable. Together, on a budget with no room in it, they stop the job.
Build the budget line by line with a contractor who has walked the property, then ask yourself what happens if the project comes in ten to fifteen percent over budget. If the answer is, “the project stops,” you probably do not have enough cushion built into the deal.
3. How Rehab Draws Actually Work
Rehab draws are one of the most misunderstood parts of fix-and-flip financing, so it is worth explaining exactly how they work before you close. Rehab funds are not handed to you at closing. They are released in stages, as completed work is verified.
That means you front the cost of each stage of work, we confirm the work is done, and then the draw is released to reimburse it. The purchase money is available at closing. The renovation money arrives as the renovation happens.
There is a practical reason for this structure. Draws keep renovation funds tied to completed work and help both sides stay aligned as the project moves forward. The tradeoff is that you need enough working capital to carry each phase of the renovation until the work is completed, verified, and the draw is released. That is an important part of planning for your first project.
4. "100% Financing" Does Not Mean Zero Cash
You may see lenders advertise financing for up to 100% of the purchase price and rehab budget, and that is a structure we offer. But 100% financing does not mean you should expect to bring no money to the deal.
You still need cash available for closing costs, carrying costs, the first phase of the renovation before a draw is released, and the unexpected expenses that tend to come with any project. As part of our underwriting, we generally look for around $40,000 in available liquidity, which is intended to make sure you have enough working capital to keep the project moving between closing, construction, draws, and payoff.
Your liquidity is something your lender will be looking at before funding the loan, so it should be part of your deal planning from the beginning. Make sure you understand not just how much you can borrow, but how much cash you will need to carry the project successfully from closing through completion.
5. Time Is Part Of Your Budget
Every additional month a project runs adds cost. Interest, taxes, insurance, utilities, and other carrying expenses continue while your capital remains tied up in the property.
First-time investors often underestimate the timeline because they focus on the construction itself and overlook everything that happens around it. Permits take time. Inspections can create delays. Materials do not always arrive when expected, and subcontractor schedules can shift. A realistic timeline that accounts for those possibilities is far more useful than an aggressive schedule that leaves no room for them.
Our loans are typically structured with a six-month initial term, with extension options available when needed. The goal should not be to build your plan around the shortest possible timeline. Build it around the timeline you realistically expect the project to take, with enough room for the delays that are part of renovation work.
6. Understand How Your Lender Looks At ARV
After-repair value is one of the most important numbers in a fix-and-flip loan, but it is still an estimate, not a guarantee of what the property will ultimately sell for.
ARV is based on comparable sales, and the quality of those comps matters. Location, size, condition, finish level, and how recently the properties sold can all affect whether a comparable really supports the value you are projecting.
You should expect your lender to review the comps you provide, but also to do their own work. At Monument City Capital, we run our own comparables on every deal so we can independently evaluate whether the proposed ARV is supported by the market today. That may mean we arrive at the same number you do, or it may lead to a conversation about why we see the value differently.
We generally lend up to 65 to 70 percent of after-repair value, depending on the deal. That leverage limit is part of how we approach risk in the loan. The goal is not to find the highest possible ARV that makes the numbers work. It is to arrive at a value we believe the market reasonably supports before the project begins.
7. Your Contractor Can Make Or Break More Than The Rehab
The contractor you choose can have a major impact on more than just the quality of the finished renovation. Their availability, communication, scheduling, and ability to work within the agreed scope all affect how smoothly the project moves from closing to completion.
For a first-time investor, that makes contractor selection an important part of the financing plan. Delays or changes in scope can increase carrying costs, shift your draw timing, and push back your eventual sale or refinance. Even a good contractor may run into scheduling or material issues, which is why realistic expectations and clear communication matter from the beginning.
Check references from people who have used the contractor for similar work. Make sure the scope, pricing, and payment expectations are clearly documented, and understand how the contractor's schedule lines up with your draw process. Price matters, but it should be considered alongside experience, communication, availability, and the overall fit for the project.
8. Communicate Early When Things Change
Something will change during the course of a renovation. That is normal. What matters is how quickly you communicate when it does.
A scope change identified in week three is something we can talk through together. The same change discovered much later, when a draw request no longer lines up with the approved budget, is harder for everyone to work through.
We do not expect every project to follow the original plan perfectly. We do expect open communication when the plan changes. If the scope shifts, work needs to be re-sequenced, or the timeline starts to move, bring your lender into the conversation early while there is still time to adjust.
9. Choose The Right Lending Partner, Not Just The Lowest Rate
It is natural to compare lenders on price, especially on a first project when every dollar matters. But rate and fees are only part of the equation.
The lender you choose also affects how quickly you can close, how smoothly draws are handled, how well the property and neighborhood are understood, and how easy it is to work through issues when the project changes. A lender with local market knowledge may see a deal differently because they understand the block, the housing stock, the buyer pool, and the realities of renovating in that market.
Experience matters too. A lender who has worked with investors through acquisitions, renovations, draws, delays, and exits can often ask better questions upfront and help set clearer expectations from the beginning. And when something changes mid-project, having an established relationship with someone who knows you and the deal can make a meaningful difference.
Compare the full financing relationship, not just the headline cost. Speed, certainty, communication, local knowledge, and experience can all have real value over the life of the project.
What To Bring Us
If you have a deal in front of you, these four things let us tell you quickly where it stands:
- The property address and purchase price
- Your rehab scope and budget
- Your ARV and the comparable sales behind it
- Your exit: sell or refinance, and by when
We underwrite in house and know the markets we lend in, which allows us to evaluate deals quickly and with local context. Our goal is to give you a clear answer early, so you know where the deal stands and can make decisions with confidence. If you want to get a feel for the types of projects we finance, our recently funded deals feature real transactions from across our market.
Have a deal in hand? Send it over and we will tell you whether it is something we would consider funding. Our fix and flip loans in Maryland are built for exactly this, and you can see the full range of our hard money loan programs or book a call with Shaun to walk through it together.
See Our Fix and Flip Loan ProgramOne Last Thing
Your first project is going to teach you things no spreadsheet can. That is not a warning, it is the point. Plan carefully, keep cash behind you, pick people you trust, and talk to your lender early when something moves. Do that and the first one becomes the foundation for the next ten.
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