Renovation deals run on speed and cash flow. You need a lender who can close fast enough to win the contract and who understands that the building is not worth its finished value on day one.
Fix and flip loans are short-term loans sized around the purchase price, the renovation budget, and what the property should be worth when the work is done. Payments are usually interest only, which keeps the monthly cost low while the property is under construction.
Who this loan fits
- Investors who buy, renovate, and sell for a profit
- Buyers who plan to renovate and then refinance into a long-term rental loan
- Investors competing against cash offers on distressed properties
- Operators with a contractor, a scope of work, and a budget
How the numbers get sized
Lenders look at two values. The first is what the property costs today. The second is the after-repair value, which is the appraiser's estimate of what it should be worth when the renovation is complete. The loan usually covers a share of the purchase price and a share of the renovation budget, with a cap tied to the after-repair value.
Your scope of work matters as much as the price. A clear budget, a signed contractor bid, and a realistic timeline make a stronger file than a rough estimate.
How the renovation money is paid out
Renovation funds are often released in draws. You finish a phase of work, the lender confirms it with an inspection or photos, and the next draw is released. This protects both sides, and it means you need enough working cash to cover each phase until the draw arrives.
Planning your exit
A fix and flip loan is short-term, commonly under two years. Your exit is either a sale or a refinance. If you plan to keep the property as a rental, a DSCR loan is a natural next step. The rent on the finished property covers the new payment and the short-term loan is paid off.
Build in extra time. Permits, weather, and contractor delays can add months, and extension fees or default interest add up quickly.
A sample flip
- Purchase price
- $220,000
- Renovation budget
- $60,000
- After-repair value
- $365,000
- Total project cost
- $280,000
- Loan size (about 80% of cost)
- $224,000
- Cash you bring, before fees
- $56,000
Illustration only. Leverage limits, rates, and fees depend on the borrower's experience, the property, and the scope of work.