Types of Fix and Flip Financing
1. Hard Money Loans
Overview: Short-term loans from private lenders based primarily on property value (ARV) rather than borrower creditworthiness.
Typical Terms:
- • Interest: 10-15%
- • Points: 2-5 upfront
- • Loan-to-ARV: 70-75%
- • Term: 6-24 months
- • Down payment: 20-30%
Best For:
- • Competitive markets (fast close)
- • Properties needing heavy renovation
- • Borrowers with credit issues
- • Experienced flippers
Example Cost: $200k property, 12% rate, 3 points = $6,000 upfront + $2,000/month interest
2. Fix and Flip Loans (Private Money Lenders)
Overview: Specialized renovation loans from private lending companies that fund both purchase and renovation in one package.
Typical Terms:
- • Interest: 8-12%
- • Points: 1-3 upfront
- • Loan-to-ARV: 75-90%
- • Term: 12-18 months
- • Renovation holdback: 100%
Best For:
- • Larger renovation budgets
- • Experienced investors
- • Properties in good areas
- • Flippers with track record
Draw Schedule: Funds released as work completes - after framing (25%), mechanicals (25%), finishes (25%), completion (25%)
3. Bridge Loans
Overview: Short-term financing that "bridges" the gap between purchase and permanent financing or sale.
Typical Terms:
- • Interest: 7-10%
- • Points: 1-2 upfront
- • Loan-to-Value: 70-80%
- • Term: 6-12 months
- • Stricter qualification
Best For:
- • Light renovation projects
- • Established investors
- • Good credit (680+)
- • Properties in prime locations
4. Business Lines of Credit
Overview: Revolving credit line for established real estate businesses.
Typical Terms:
- • Interest: 7-12%
- • Credit limit: $50k-$500k+
- • Revolving (reuse as paid)
- • Personal guarantee usually required
Best For:
- • Renovation costs only
- • Multiple simultaneous projects
- • Established LLC/Corp
- • Supplement to other financing
5. HELOC (Home Equity Line of Credit)
Overview: Using equity from your primary residence to fund flip projects.
Typical Terms:
- • Interest: 6-10%
- • Up to 85% of home equity
- • Lowest rates of any option
- • Flexible draw period
Best For:
- • First-time flippers
- • Homeowners with equity
- • Smaller projects
- • Lower risk tolerance
⚠️ Risk: Your primary residence is collateral. If flip fails, you could lose your home.
6. Cash-Out Refinance
Overview: Refinance primary home to pull cash for investment properties.
Typical Terms:
- • Interest: 6-8%
- • Up to 80% LTV
- • 15-30 year term
- • Closing costs: 2-5%
Best For:
- • Multiple flips planned
- • Long-term strategy
- • Good credit (720+)
- • Significant home equity
Qualification Requirements
What Lenders Look For
1. Experience Level
- • Beginner (0-1 flips): Higher rates, lower LTV, may require mentor or partner
- • Intermediate (2-5 flips): Standard rates and terms
- • Experienced (6+ flips): Best rates, highest LTV, fastest approval
2. Property Analysis
- • ARV (After Repair Value): Supported by comps, conservative estimate
- • Purchase Price: Must follow 70% rule or lender's formula
- • Renovation Budget: Detailed scope of work with contractor bids
- • Exit Strategy: Clear plan to sell or refinance
3. Financial Strength
- • Down Payment: 15-30% of purchase price in liquid funds
- • Reserves: 6-12 months of loan payments saved
- • Credit Score: 620+ minimum (680+ preferred)
- • Debt-to-Income: Less important than property deal quality
4. Documentation Needed
- • Purchase contract or proof of ownership
- • Detailed renovation budget with contractor bids
- • Comparable sales supporting ARV
- • Bank statements (2-3 months)
- • Photo documentation of property condition
- • Exit strategy timeline
Approval Timeline
| Loan Type | Application to Approval | Approval to Closing |
|---|---|---|
| Hard Money | 1-3 days | 3-7 days |
| Fix and Flip Loan | 3-7 days | 7-14 days |
| Bridge Loan | 5-10 days | 10-20 days |
| HELOC | 10-14 days | 14-30 days |
Cost Breakdown & Real Examples
Total Cost of Borrowing
Understanding the true cost means looking beyond just interest rates to include all fees and holding costs.
Example 1: Hard Money Loan
Scenario: $200k purchase, $50k renovation, 12% interest, 3 points, 6-month hold
Example 2: Fix and Flip Loan
Scenario: $200k purchase, $50k renovation, 9% interest, 2 points, 8-month hold
Example 3: HELOC
Scenario: $100k HELOC at 8% for renovation costs, 6-month project
💡 Lowest cost, but requires home equity and puts primary residence at risk
Key Insight:
Don't just compare interest rates. Calculate total dollars spent over expected holding period. A 12% hard money loan for 4 months may cost less total than a 9% loan if it lets you close faster and flip sooner.
Top Fix and Flip Lenders
National Lenders
These lenders operate in most states and have established programs for fix and flip investors.
Kiavi (formerly LendingHome)
Specialty: Tech-enabled fix and flip loans
- • Rates: Starting at 8.5%
- • LTV: Up to 90%
- • Terms: 6-18 months
- • Min loan: $75k
Best for: Experienced investors, competitive markets
Lima One Capital
Specialty: New and experienced investor programs
- • Rates: 9.5-12%
- • LTV: Up to 90%
- • Terms: 12-13 months
- • Min credit: 660
Best for: First-time flippers with mentors
RCN Capital
Specialty: Short-term rental and flip financing
- • Rates: 8.75-11%
- • LTV: Up to 90%
- • Terms: 12 months
- • Fast closing (7-10 days)
Best for: Multi-state investors
Anchor Loans
Specialty: Fast closings, flexible underwriting
- • Rates: 9-13%
- • LTV: Up to 80%
- • Close in 3-5 days
- • Experience required
Best for: Quick closes, experienced flippers
How to Choose a Lender
1. Compare Total Costs, Not Just Rates
Calculate total dollars including points, fees, and interest for your expected timeline.
2. Check Closing Speed
In competitive markets, closing 1 week faster can make or break a deal.
3. Verify They Lend in Your Market
Some lenders exclude certain states, cities, or property types.
4. Read Reviews from Other Investors
Check BiggerPockets forums, Google reviews, and social media for lender experiences.
5. Build a Relationship
Once you find a good lender, use them repeatedly for faster approvals and better terms.
🔍 Due Diligence Checklist:
- ☐ Verify lender is licensed in your state
- ☐ Check BBB rating and complaint history
- ☐ Get references from 2-3 past borrowers
- ☐ Review complete fee schedule before applying
- ☐ Understand prepayment penalties (if any)
- ☐ Clarify draw/inspection process for renovation funds
Application Process & Tips
Step-by-Step Application
Step 1: Pre-Qualification (Before Making Offer)
- • Submit basic financial info and experience
- • Get pre-qualified for loan amount range
- • Receive pre-approval letter for offers
- • Timeline: 1-2 days
Step 2: Property Submission (Under Contract)
- • Submit purchase contract
- • Provide renovation scope and budget
- • Submit comps supporting ARV
- • Property photos/inspection report
- • Timeline: 2-3 days
Step 3: Underwriting
- • Lender reviews property and financials
- • May order appraisal or BPO (Broker Price Opinion)
- • Review renovation budget feasibility
- • Issue term sheet with final terms
- • Timeline: 3-7 days
Step 4: Closing
- • Review and sign loan documents
- • Wire down payment + closing costs
- • Title company records deed and lien
- • Receive purchase funds
- • Timeline: 1-3 days
Documents to Prepare
Financial Documents
- ☐ Bank statements (2-3 months)
- ☐ Proof of down payment funds
- ☐ Credit report (they'll pull, but review yours first)
- ☐ Tax returns (if requested)
- ☐ Proof of flip experience
Property Documents
- ☐ Purchase contract
- ☐ Property photos (current condition)
- ☐ Scope of work with itemized costs
- ☐ Contractor bids (if required)
- ☐ 3-5 comparable sales for ARV
- ☐ Inspection report (if available)
Tips for Faster Approval
- Have everything ready: Complete application packages get approved faster
- Be conservative on ARV: Lenders prefer deals with built-in margin
- Show detailed renovation plan: Demonstrates you know what you're doing
- Highlight past successes: Before/after photos, profit statements from previous flips
- Build relationships early: Talk to lenders before you need money
- Respond quickly: When lender asks for additional info, provide it same day
💡 Pro Tip:
Apply with 2-3 lenders for your first deal to compare terms. Once you find your favorite, build loyalty - repeat borrowers get better rates, higher LTV, and faster approvals.
