Fix-and-Flip Loans

Short-Term Financing for Acquisition, Renovation and Resale

Fix-and-flip financing is designed for investors purchasing properties that require renovation before resale or another defined exit. These loans focus heavily on the acquisition, rehabilitation plan, investor strength and expected after-repair value.

Finance Purchase and Renovation

Many programs can provide acquisition financing together with an approved rehabilitation budget released as work progresses.

The Exit Strategy Matters From Day One

Whether the property will be sold or refinanced after renovation affects how the initial financing should be structured.

Financing a Property That Isn't Yet Stabilized

A distressed or substantially outdated property may not fit ordinary long-term mortgage requirements in its current condition.

Fix-and-flip financing is designed to bridge the period between acquisition and completion of the renovation.

The lender evaluates both the property's present condition and what it is expected to become after the proposed work.

After-Repair Value

After-Repair Value, commonly called ARV, is an estimate of the property's market value after the planned renovation has been completed.

ARV can be an important component in determining the maximum financing available.

An ambitious renovation budget does not automatically produce an equally large increase in market value, so the scope of work and local market must support the projected result.

Rehabilitation Funds and Draws

Approved renovation funds are commonly released in stages rather than entirely at closing.

Investors therefore need to understand the draw process, inspection requirements and whether they must initially advance some construction expenses.

Adequate liquidity remains important even when renovation financing is included.

Experience, Liquidity and Credit

Fix-and-flip programs can evaluate investor experience, credit, available liquidity and project history in addition to the property itself.

An experienced investor with adequate reserves may have access to different leverage or pricing than a first-time investor.

Sale or Refinance as the Exit

Many investors sell the completed property. Others decide to retain it as a rental.

If retention is a realistic possibility, permanent financing such as DSCR or other investment-property financing should be considered before the short-term loan is selected.