A fix-and-flip loan is short-term, business-purpose financing that covers an investment property purchase and, often, part or all of the renovation budget. Lenders size these loans on the purchase price, the rehab budget and the after-repair value (ARV), and they weigh your experience. Rehab funds are usually released in draws as work is completed.
How fix-and-flip loans work
- Short terms. Commonly 6 to 24 months, often interest-only, with the expectation you sell or refinance.
- Sized on the deal. Lenders look at purchase price, rehab budget and the appraised after-repair value.
- Draws. Rehab money is typically held back and released after inspections confirm completed work.
- Experience counts. Many lenders offer better terms to investors with completed flips, and some work with first-time flippers.
- Business purpose only. You can't live in the property.
Underwriting the deal before you buy
Kristen has flipped homes herself. Before you write an offer she can run the numbers the way a lender will: purchase, rehab, holding costs, selling costs and the ARV a lender is likely to accept. Thin margins show up on paper before they show up in your bank account.
Exit options
Sell the property, or keep it and refinance into a long-term rental loan such as a DSCR loan. Plan the exit before closing, because seasoning rules affect how soon a refinance can use the new appraised value.
Fix-and-flip programs are offered by select wholesale lenders; terms, leverage and experience requirements vary by lender and deal.
Common questions
Can a first-time flipper get a fix-and-flip loan?
Some lenders lend to first-time flippers, usually with lower leverage or a larger down payment than experienced investors receive.
Do fix-and-flip loans cover renovation costs?
Many do. Rehab funds are typically held back and released in draws after completed work is inspected.
Can I refinance a flip into a rental loan?
Yes. Many investors refinance into a DSCR or conventional investment loan once the renovation is done. Lender seasoning rules determine when the new appraised value can be used.