Understanding Fix-and-Flip Loans
Fix-and-flip loans provide short-term capital for real estate investors acquiring properties that require repairs, improvements, or substantial renovation before they can be resold or refinanced.
These loans are commonly structured around the property’s purchase price, current condition, renovation budget, projected after-repair value, borrower experience, and proposed exit strategy. Depending on the transaction, financing may include a portion of the acquisition cost and approved renovation expenses.
Fix-and-flip financing may be appropriate for
- Distressed or outdated residential properties
- Properties purchased below market value
- Auction or foreclosure acquisitions
- Cosmetic renovation projects
- Substantial rehabilitation projects
- Properties intended for resale
- Properties that will be retained as rentals after renovation
What Funding Sources May Review
Renovation funds are often released through a draw process as work is completed and verified. Before closing, the lender may review the proposed scope of work, contractor information, project budget, estimated completion timeline, contingency reserves, and anticipated resale value.
Important Program Considerations
Borrower experience can be an important consideration. However, certain programs may be available to newer investors when the transaction, property, financial contribution, and project team support the proposed business plan.
Repayment and Exit Strategy
A clear exit strategy is essential. Common repayment strategies include selling the renovated property, refinancing into a DSCR or rental loan, or using another source of permanent financing after the project has been completed and stabilized.
Information to Prepare
To request a preliminary review, provide the purchase price, current property value, projected after-repair value, renovation budget, requested loan amount, expected project duration, borrower experience, and intended repayment strategy.