Fix-and-flip investing can be highly profitable — but only if you can close fast and access capital before another buyer swoops in. That’s exactly what fix-and-flip loans are designed for.
What Is a Fix-and-Flip Loan?
A fix-and-flip loan is a short-term, asset-based loan that finances both the purchase and renovation of a distressed property. Unlike conventional mortgages, these loans are designed to close in days — not months.
Key Terms for Fix-and-Flip Loans
- Loan amount: Up to 90% of purchase price + 100% of rehabilitation costs
- LTV basis: Based on After-Repair Value (ARV), not current as-is value
- Loan term: 6–24 months (interest-only payments)
- Closing timeline: 5–10 business days
- Property types: SFR, 2-4 unit, condos, small commercial
- Credit: 600+ (asset-based — property and deal merit matter most)
After-Repair Value (ARV) — The Key Number
Fix-and-flip lenders focus on ARV — what the property will be worth after renovations are complete. A property worth $150,000 today with $50,000 in renovations and an ARV of $275,000 has strong fundamentals for fix-and-flip financing.
We use an appraisal or BPO (broker price opinion) to determine ARV, then loan up to 70–75% of that value.
How Draw Schedules Work
Rehab funds are held in reserve and released in draws as work is completed. You submit draw requests with photos or contractor invoices, and funds are released within 24–48 hours. This keeps your project moving without tying up your own capital.
Exit Strategy: Sell or Refi
Most fix-and-flip investors exit by selling the renovated property. Some choose to refinance into a long-term DSCR loan if they want to hold it as a rental — the “BRRRR” strategy.
Common Fix-and-Flip Mistakes to Avoid
- Underestimating renovation costs — build in a 10-15% contingency buffer beyond your contractor’s initial bid; surprises behind walls are the rule, not the exception
- Over-improving for the neighborhood — a renovation that exceeds what comparable homes on the block can support won’t be reflected in your ARV appraisal
- Underestimating holding costs — interest, insurance, utilities, and property taxes accrue every month the project runs, and delays compound quickly
- Skipping a proper contractor vetting process — a missed deadline on a hard money loan’s interest-only clock is far more expensive than the time spent checking references upfront
How to Estimate Your Renovation Budget Accurately
The most reliable budgets come from getting a licensed contractor to walk the property in person and provide a line-item bid — not a rough per-square-foot estimate. Separate the budget into cosmetic work (paint, flooring, fixtures) and structural/systems work (roof, foundation, electrical, plumbing), since the second category is where cost overruns most often hide.
What a Fix-and-Flip Loan Actually Costs
Beyond the interest rate, expect origination points (typically 1.5-3% of the loan amount), an appraisal or BPO fee, and standard closing costs. Because the loan is interest-only and short-term, total borrowing cost is driven far more by how long the project actually takes than by the headline rate — which is exactly why realistic timeline planning matters as much as budget planning.
Choosing the Right Property to Flip
The strongest flip candidates are properties that are cosmetically distressed but structurally sound — homes that scare off conventional buyers because they “look” bad but don’t have foundation, roof, or major systems problems underneath. Those cosmetic-only projects renovate fastest, cost the least to complete, and carry the lowest risk of the kind of budget overrun that erodes flip profit.
Ready to fund your next flip? See our Fix & Flip Loan program or apply now for a free quote. We close in 5–10 days.