Fix and Flip Loans
Last updated: March 2026
Fix and flip loans are short-term financing products designed for real estate investors who buy, renovate, and resell properties. These loans typically cover a portion of the purchase price and rehab costs, with repayment expected once the property is sold. Loan terms, rates, and leverage depend on the property, borrower qualifications, and market conditions.
What Is a Fix and Flip Loan?
A fix and flip loan is a short-term bridge loan used by real estate investors to fund the acquisition and renovation of investment properties. Unlike conventional mortgages, these loans are designed for properties that need significant work before resale.
Borrowers use fix and flip loans to purchase undervalued or distressed properties, complete renovations according to a planned scope of work, and sell at market value. The loan is repaid from the sale proceeds.
How Fix and Flip Loans Are Structured
- Purchase price coverage: lenders may cover up to 85-90% of the purchase price
- ARV leverage: total loan commonly capped at 70-75% of after repair value
- Interest-only payments during the loan term
- Term range: typically 6 to 18 months with extension options
- Rehab funds released in draws after work verification
- Origination fees typically range from 1 to 3 points
ARV, LTC, and LTV Explained
After Repair Value (ARV) is the estimated market value of a property after planned renovations. Lenders use comparable sales of recently renovated properties to estimate ARV. This figure determines the maximum total loan amount when combined with the LTV cap.
Loan-to-Cost (LTC) measures the loan amount against the total project cost — purchase price plus rehab budget. A 90% LTC means the lender covers 90% of total costs and the borrower brings 10%.
Loan-to-Value (LTV) in fix and flip lending refers to the loan amount as a percentage of ARV. A 75% ARV cap means the total loan cannot exceed 75% of the projected after repair value. The actual maximum loan is the lower of the LTC and LTV calculations.
How Rehab Draws Work
- Borrower completes a portion of the renovation work
- Borrower submits a draw request to the lender with documentation
- Lender may send an inspector to verify completed work
- Upon verification, lender releases the draw amount
- Process repeats for each phase of renovation
What Lenders Review
- Purchase contract or letter of intent
- Detailed rehab scope of work with line-item budget
- ARV support with comparable sales
- Title commitment and property insurance
- Borrower experience and track record
- Credit report and score
- Liquidity and proof of funds for down payment
- Exit strategy and timeline
Common Deal Killers
- Weak or unsupported comparable sales for ARV
- Unrealistic renovation budget or timeline
- No clear exit strategy
- Insufficient liquidity for down payment and reserves
- Poor contractor documentation
- Title issues or liens on the property
Example Fix and Flip Scenario
| Purchase Price | $225,000 |
| Rehab Budget | $65,000 |
| After Repair Value | $400,000 |
| Total Project Cost | $290,000 |
| Loan at 90% LTC | $261,000 |
| ARV Check at 75% | $300,000 ✓ |
Illustrative only. Actual loan structure depends on the file.
Frequently Asked Questions
What is a fix and flip loan?
A fix and flip loan is short-term financing used by real estate investors to purchase, renovate, and resell properties. These loans typically cover a portion of the purchase price and rehab costs, with repayment expected upon sale.
How is a fix and flip loan structured?
Fix and flip loans are typically structured with interest-only payments over a 6 to 18 month term. Loan amounts are based on a percentage of the purchase price (LTC) and capped at a percentage of the after repair value (ARV LTV).
What does ARV mean?
After Repair Value (ARV) is the estimated market value of a property after planned renovations are completed. Lenders use ARV to determine the maximum loan amount, typically capping total financing at 70-75% of ARV.
What is the difference between LTC and LTV?
Loan-to-Cost (LTC) measures the loan amount against total project cost (purchase + rehab). Loan-to-Value (LTV) measures the loan against the property's after repair value. Both constraints apply, and the lower result determines the maximum loan.
How do rehab draws work?
Rehab funds are typically released in draws after work is completed and verified. Borrowers request a draw, the lender may send an inspector, and funds are released upon verification of completed work.
What credit score is typically needed?
Most fix and flip lenders look for a minimum credit score of 620-660, though requirements vary. Higher credit scores may qualify for better rates and higher leverage.
Can first-time investors qualify?
Some lenders work with first-time investors, though terms may differ. First-time borrowers may face higher rates, lower leverage, or additional requirements compared to experienced investors.
How fast can a fix and flip loan close?
Many fix and flip loans can close within 10 to 21 days, depending on the lender and deal readiness. Having documentation prepared can expedite the process.
What documents are needed for a fix and flip loan?
Common requirements include a purchase contract, detailed rehab scope and budget, ARV support with comparable sales, proof of funds, credit authorization, and entity documentation if applicable.
Are fix and flip loan rates negotiable?
Rates are influenced by borrower experience, credit score, leverage, and the overall deal profile. Stronger profiles and lower-leverage deals typically receive better pricing.
Key Takeaways
- Fix and flip loans are short-term, interest-only financing for property renovation and resale
- Loan sizing is based on both LTC and ARV LTV — the lower calculation applies
- Rehab funds are released in draws after work is completed and verified
- Borrower experience, credit, and liquidity all influence available terms
- A clear exit strategy and realistic budget are essential for approval
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