What Is a Fix & Flip Loan?
A fix and flip loan is short-term financing designed for investors who buy distressed properties, renovate them, and sell for profit. The loan covers the purchase price and often 100% of the rehab costs, disbursed through a draw schedule as work is completed.
Unlike conventional loans, fix and flip financing is based on the After Repair Value (ARV) — what the property will be worth after renovation. This lets you buy properties below market value and leverage the future equity to fund the project.
The BRRRR connection: Many investors no longer flip to sell. They flip to HOLD — Buy, Rehab, Rent, Refinance, Repeat. This means two loans per deal: a fix and flip loan to acquire and rehab, then a DSCR refinance into permanent financing. We match both.
How the Numbers Work
Most fix and flip lenders use two key metrics:
- Loan-to-Cost (LTC) — Up to 85-90% of total project cost (purchase + rehab)
- Loan-to-ARV (LTARV) — Up to 70-75% of the after-repair value
The lender uses whichever is LOWER. So if you're buying a $150K house, putting $50K into rehab, and the ARV is $280K: your total cost is $200K at 90% LTC = $180K loan. But 70% of ARV = $196K. The lower number ($180K) is your max loan. You bring $20K plus closing costs.
Draw Schedules
Rehab funds aren't disbursed all at once. Lenders release funds in draws — typically 3-5 draws throughout the project. You complete a phase of work, the lender sends an inspector, and the draw is released. Some lenders offer upfront draws for material purchases. Others are strictly reimbursement-based. This matters for your cash flow planning.
What to Watch Out For
- Extension fees — If your project runs over the original term, most lenders charge 1-2% to extend. Budget for delays.
- Draw inspection costs — $150-$300 per draw inspection, paid by you. Factor it in.
- Holding costs — Interest payments, insurance, taxes, and utilities during the rehab. These eat into your profit margin every month.
- Exit strategy risk — If the market shifts or your ARV estimate was wrong, you're holding an expensive short-term loan on a property that won't sell at your target price.
- Experience requirements — Some lenders require 2-3 completed flips before they'll fund. First-time flippers may need a stronger down payment or a mentor/partner on the deal.
Fix & Flip Market Reality (2026)
Flip volume is down 32% from the peak, and margins are at their lowest since 2008. But that's not the full story. Smart investors are pivoting from flip-to-sell to flip-to-hold (BRRRR). The rehab creates equity, the rental income creates cash flow, and the refinance into DSCR pulls your capital back out. Two closings. Two revenue events for the same property.
Run Your Numbers
Use our Deal Analyzer to model the full project — purchase, rehab, holding costs, and exit. Know your margins before you commit.