Fix & Flip Loan Guide
Navigate the complexities of fix and flip financing with our practical guide for active real estate investors. This guide outlines the core structure and requirements for acquisition and renovation capital.
Loan Structure & Leverage
Fix and flip loans are typically structured to cover a percentage of both the purchase price and the renovation budget. Most institutional private lenders offer up to 90% of LTC (Loan to Cost) and up to 75% of the After Repair Value (ARV). Understanding these leverage points is the first step in analyzing your deal's cash requirements.
The Renovation Budget (SOW)
A detailed Scope of Work (SOW) is mandatory. Lenders fund the renovation portion through a draw process, reimburseable after work is completed and inspected. Your budget must clearly categorize costs by line item to ensure a smooth draw experience and avoid funding delays during the project.
Experience & Liquidity Requirements
Lenders evaluate your track record in the last 36 months to determine pricing and leverage. Furthermore, you must demonstrate sufficient liquidity for the down payment, closing costs, and the first few stages of the renovation before the first draw is released.
Exit Strategy & Valuation
Success depends on the After Repair Value. Lenders will order an appraisal to validate your exit strategy—whether it is a market sale or a refinance into a long-term rental loan. Ensure your comps are within the same neighborhood and reflect the finish level of your proposed renovation.