Fix and flip financing has become the go-to funding solution for real estate investors who want to purchase distressed properties, renovate them, and sell for a profit. Unlike traditional mortgages that can take 30 to 45 days to close, fix and flip loans can fund in as little as 7 days, giving investors the speed they need to win deals in competitive markets.
Whether you are a first-time flipper or a seasoned investor with dozens of projects under your belt, understanding your financing options is critical to maximizing profits. This guide covers everything you need to know about fix and flip financing, from loan types and rates to qualification requirements and exit strategies.
Fix and Flip Financing Market Overview 2026
$72,000
Average Flip Profit
10-15%
Typical Rate Range
7-14
Days to Fund
75%
Max ARV Financing
What Is Fix and Flip Financing and How Does It Work?
Fix and flip financing refers to short-term loans designed specifically for purchasing and renovating investment properties. These loans differ from traditional mortgages in several key ways:
- Short terms: Most fix and flip loans have terms of 12 to 18 months, compared to 15 or 30 years for conventional mortgages
- Asset-based underwriting: Lenders focus on the property value and potential rather than just your personal income
- Fast closings: Funding typically happens in 7 to 14 days instead of 30 to 45 days
- Renovation funds included: Many loans cover both the purchase price and rehab costs
The typical fix and flip loan works in stages. First, you receive funds to purchase the property. Then, as you complete renovation milestones, the lender releases additional funds for construction costs through a draw schedule. Once renovations are complete, you sell the property and pay off the loan.
This structure makes fix and flip financing ideal for investors who want to leverage their capital across multiple projects rather than tying up all their cash in a single deal.
What Are the Different Types of Fix and Flip Loans Available?
Several financing options exist for fix and flip investors, each with unique advantages depending on your experience level, timeline, and exit strategy.
Fix and Flip Loan Types Compared
Hard Money Loans
- Fund in 7-10 days
- Up to 100% rehab costs
- Asset-based approval
- 10-15% interest rates
- 6-18 month terms
Bridge Loans
- Lower rates 8-12%
- Longer 12-24 month terms
- Multiple property types
- 10-21 days to fund
- May require more documentation
DSCR Refinance
- 30-year terms available
- Based on rental income
- 7-9% rates
- Only for exit strategy
- Requires stabilized property
Hard Money Loans
Hard money loans are the most popular fix and flip financing option. These loans come from private lenders or specialized lending companies rather than traditional banks. Hard money lenders prioritize the deal over the borrower, focusing primarily on the property's after-repair value (ARV) when making lending decisions.
Key features of hard money loans:
- Interest rates typically range from 10% to 15%
- Loan terms of 6 to 18 months
- Funding in 7 to 10 days
- LTV up to 85% of purchase price
- Up to 100% of renovation costs covered
- Maximum 70% to 75% of ARV
Hard money loans work best for investors who need speed and flexibility. If you find a great deal that requires fast closing, hard money is often the only realistic option. These lenders understand the fix and flip business and structure their products accordingly.
Bridge Loans
Bridge loans serve as temporary financing that bridges the gap between purchasing a new property and securing long-term financing or selling another asset. While similar to hard money loans, bridge loans often come with slightly lower rates and longer terms.
Key features of bridge loans:
- Interest rates typically range from 8% to 12%
- Loan terms of 12 to 24 months
- Funding in 10 to 21 days
- More flexible qualification requirements than banks
- Can be used for multiple property types
Bridge loans work well for investors who need more time to complete renovations or who plan to refinance into a long-term loan rather than sell. The longer terms provide a cushion for unexpected delays without triggering expensive extensions.
DSCR Loans for Refinancing
Debt Service Coverage Ratio (DSCR) loans are not technically fix and flip loans, but they play a crucial role in many investors' exit strategies. After completing renovations, some investors choose to hold the property as a rental rather than sell. DSCR loans allow you to refinance based on the property's rental income rather than your personal income.
Key features of DSCR loans:
- Interest rates typically range from 7% to 9%
- 30-year terms available
- Qualify based on rental income, not personal income
- No tax returns or employment verification required
- Minimum DSCR of 1.0 to 1.25 typically required
This exit strategy, known as the BRRRR method (Buy, Rehab, Rent, Refinance, Repeat), has become increasingly popular among investors looking to build long-term wealth through rental properties while recycling their capital into new deals.
Private Money Loans
Private money loans come from individual investors rather than lending companies. These could be friends, family members, or private investors you meet through networking. Private money often offers the most flexibility but requires strong relationships and trust.
Key features of private money loans:
- Interest rates vary widely (8% to 15%)
- Highly negotiable terms
- Minimal paperwork in many cases
- Relationship-based lending
- Can be structured creatively
Building relationships with private money lenders takes time, but these connections can become valuable competitive advantages as your fix and flip business grows.
Fix and Flip Financing Rates by Lender Type
| Lender Type | Interest Rate | Origination Points | Funding Speed |
|---|---|---|---|
| Hard Money Lenders | 10-15% | 1-3 points | 7-10 days |
| Bridge Lenders | 8-12% | 1-2 points | 10-21 days |
| Private Money | 8-15% | 0-2 points | 7-14 days |
| Banks/Credit Unions | 6-9% | 0-1 points | 30-45 days |
What Interest Rates and Terms Should You Expect for Fix and Flip Loans?
Understanding the true cost of fix and flip financing helps you accurately project profits and avoid surprises. Here is what to expect from current market rates and terms.
Interest Rates
Fix and flip loan interest rates typically range from 10% to 15%, depending on several factors:
- Lender type: Banks offer lower rates but slower funding; hard money lenders charge more for speed
- Experience level: Seasoned investors with proven track records often qualify for better rates
- Loan-to-value ratio: Lower LTV means lower risk for lenders, which translates to better rates
- Property location: Properties in strong markets may qualify for better terms
- Credit score: While less important than in traditional lending, better credit still helps
Points and Fees
Beyond interest rates, fix and flip loans typically include origination points and fees:
- Origination points: 1 to 3 points (1% to 3% of loan amount) charged at closing
- Processing fees: $500 to $2,000 for underwriting and documentation
- Appraisal fees: $400 to $800 depending on property type
- Draw fees: Some lenders charge $100 to $300 per draw inspection
For a $200,000 loan with 2 points, you would pay $4,000 in origination fees alone. Always factor these costs into your project budget when calculating potential profits.
Loan Terms
Most fix and flip loans have terms between 12 and 18 months:
- 6-month terms: For quick cosmetic flips in hot markets
- 12-month terms: The most common term, suitable for most renovation projects
- 18-month terms: For extensive renovations or slower markets
- 24-month terms: Available from some bridge lenders for major rehabs
Many lenders offer extension options if your project takes longer than expected. Extension fees typically run 1 to 2 points for an additional 3 to 6 months.
Typical Fix and Flip Loan Structure
Up to 85%
Purchase LTV
Up to 100%
Rehab Coverage
70-75%
Max ARV
10-20%
Down Payment
Ready to discuss your fix and flip financing options? Contact our team to get a personalized quote within 24 hours.
How Do You Qualify for Fix and Flip Financing?
Qualifying for fix and flip loans differs significantly from traditional mortgage qualification. Here is what lenders evaluate when reviewing your application.
Credit Score Requirements for Fix and Flip Financing
| Loan Type | Minimum Score | Preferred Score | Impact on Rate |
|---|---|---|---|
| Hard Money | 600-620 | 680+ | Lower score = 1-2% higher |
| Bridge Loans | 620-650 | 700+ | Lower score = stricter terms |
| DSCR Refinance | 660-680 | 720+ | Below 700 limits options |
| Private Money | Varies | 650+ | Relationship dependent |
Credit Score Requirements
While fix and flip lenders focus primarily on the deal, credit scores still matter:
- Hard money loans: Minimum 600 to 620 credit score
- Bridge loans: Minimum 620 to 650 credit score
- DSCR refinance: Minimum 660 to 680 credit score
Borrowers with lower credit scores can still qualify but may face higher rates or larger down payment requirements. Some lenders specialize in working with borrowers who have credit challenges, though terms will reflect the additional risk.
Experience Level
Lenders want to know you can successfully complete the project:
- First-time flippers: May face higher rates and lower leverage but can still qualify with strong deals
- 1 to 3 completed flips: Considered emerging investors with access to better terms
- 4 or more completed flips: Experienced investors often qualify for the best rates and highest leverage
If you are new to flipping, partnering with an experienced investor or contractor can help you qualify for better terms. Many lenders also offer mentorship programs or will consider your general construction or real estate experience.
Down Payment and Reserves
Most fix and flip loans require:
- Down payment: 10% to 20% of purchase price
- Cash reserves: 3 to 6 months of holding costs
- Renovation contribution: Some lenders require you to fund the first draw
Having adequate reserves shows lenders you can weather unexpected costs or delays without defaulting. This financial cushion protects both you and the lender from common fix and flip challenges.
Property Requirements
Lenders also evaluate the property itself:
- Property type: Single-family homes are easiest to finance; multifamily and commercial may require specialized lenders
- Condition: Most lenders finance properties needing renovation, but some set minimum habitability standards
- Location: Properties in strong markets with active buyers are preferred
- ARV support: The projected after-repair value must be supported by comparable sales
The Fix and Flip Financing Process
Find the Deal
Locate distressed property with profit potential
Analyze Numbers
Calculate ARV, rehab costs, and projected profit
Apply for Financing
Submit property details and borrower info
Close and Fund
Sign docs and receive purchase funds in 7-14 days
Complete Rehab
Renovate property with draw disbursements
Exit and Profit
Sell or refinance to repay loan
How Do You Calculate ARV and Why Does It Matter?
After-repair value (ARV) is the estimated market value of a property after all renovations are complete. This number is critical because most fix and flip lenders base their maximum loan amount on a percentage of ARV, typically 70% to 75%.
The ARV Calculation Process
Calculating ARV involves analyzing comparable sales (comps) of similar renovated properties in the same area:
- Find 3 to 6 comparable sales from the past 6 months within 1 mile of your property
- Adjust for differences in square footage, bedrooms, bathrooms, and features
- Average the adjusted values to estimate your property's ARV
ARV Calculation Example
| Comparable | Sale Price | Square Feet | Adjusted Value |
|---|---|---|---|
| Comp 1 | $285,000 | 1,600 SF | $278,500 |
| Comp 2 | $275,000 | 1,450 SF | $281,500 |
| Comp 3 | $290,000 | 1,550 SF | $287,000 |
| Subject Property | TBD | 1,500 SF | $282,333 AVG |
The 70% Rule
Many investors use the 70% rule as a quick way to determine their maximum purchase price:
The 70% Rule for Fix and Flip Success
Maximum Purchase Price = (ARV x 70%) - Repair Costs. For a property with $300,000 ARV and $50,000 in repairs: ($300,000 x 0.70) - $50,000 = $160,000 max offer. This builds in profit margin and contingency for unexpected costs.
Using this formula with an ARV of $300,000 and estimated repairs of $50,000:
Maximum Purchase Price = ($300,000 x 0.70) - $50,000 = $160,000
This formula builds in a margin for profit and unexpected costs. Experienced investors in competitive markets sometimes work with tighter margins (75% to 80% of ARV), but beginners should stick to the 70% rule until they have several successful flips under their belt.
Why Accurate ARV Matters
Getting ARV wrong can destroy your profits:
- Overestimate ARV: You pay too much for the property and end up underwater
- Underestimate ARV: You miss good deals by making offers that are too low
- Ignore market trends: Rising or falling markets can significantly impact your actual sale price
Always get a professional appraisal or BPO (broker price opinion) to validate your ARV calculations before making large investments. The cost of an appraisal is minimal compared to the financial risk of getting ARV wrong.
What Exit Strategies Work Best for Fix and Flip Projects?
Your exit strategy determines how you will repay the loan and realize your profit. Having a clear exit strategy, and backup plans, is essential for successful fix and flip investing.
Exit Strategy Options
Sell to Retail Buyer
- Highest sale price
- Strong demand in good markets
- 30-45 day buyer financing
- Staging and marketing costs
Sell to Investor
- Cash close in 7-14 days
- No staging needed
- Lower sale price
- Requires investor network
Refinance to Rental (BRRRR)
- Build long-term wealth
- Recover capital for next deal
- Must cash flow as rental
- Ties up some equity
Strategy 1: Sell to a Retail Buyer
The most common exit strategy is selling the renovated property to a homeowner. This typically yields the highest sale price but requires:
- Quality renovations that appeal to owner-occupants
- Proper staging and marketing
- Patience for showings and negotiations
- Time for buyer financing to close (30 to 45 days)
Retail sales work best in strong seller's markets where homes move quickly and buyers compete for limited inventory.
Strategy 2: Sell to Another Investor
Selling to an investor is faster but usually means accepting a lower price:
- Cash buyers can close in 7 to 14 days
- No need for perfect finishes or staging
- Lower marketing costs
- Best for properties that work better as rentals than owner-occupied homes
Building relationships with other investors creates a reliable exit option when retail sales are slow or when a property is better suited for rental than owner-occupancy.
Strategy 3: Refinance to a Rental (BRRRR Method)
Instead of selling, you can refinance into a long-term loan and hold the property as a rental:
- Build long-term wealth through appreciation and cash flow
- Recover your initial investment to use on the next deal
- Requires the property to generate sufficient rental income
- DSCR loans make qualification easier than conventional financing
The BRRRR strategy works particularly well when you find properties in areas with strong rental demand. You capture the forced appreciation from renovations while building a portfolio of cash-flowing assets.
Strategy 4: Wholesale the Contract
If you discover issues that make the project unfeasible, you may be able to wholesale the contract to another investor:
- Assign your purchase contract for a fee
- Avoid closing costs and renovation headaches
- Lower profit but minimal risk
- Requires an active investor network
Have questions about the best exit strategy for your project? Speak with a lending specialist who can help you evaluate your options.
What Are the Biggest Mistakes to Avoid with Fix and Flip Financing?
Learning from others' mistakes can save you thousands of dollars and months of frustration. Here are the most common pitfalls and how to avoid them.
Mistake 1: Underestimating Renovation Costs
The number one mistake new flippers make is underestimating repair costs. To avoid this:
- Get multiple contractor bids before making an offer
- Add a 10% to 20% contingency to your budget
- Account for holding costs if renovations take longer than expected
- Inspect thoroughly before purchasing, including roof, HVAC, plumbing, and electrical
Experienced investors know that surprises are inevitable. The question is not whether unexpected costs will appear, but how well you have prepared for them.
Mistake 2: Overestimating ARV
Optimism about sale price leads to overpaying for properties:
- Use conservative comps, not the highest sales in the area
- Adjust for market conditions if the market is slowing
- Get professional appraisals for large projects
- Know your local market intimately
A 5% overestimate on ARV can completely eliminate your profit margin on a tight deal.
Mistake 3: Ignoring Holding Costs
Monthly Holding Costs to Budget
$2,000+
Monthly Interest
$200-500
Property Taxes
$150-300
Insurance
$200-400
Utilities
Warning: Holding Cost Impact
A project running 2 months over schedule on a $200,000 loan at 12% adds $4,000 in interest alone. Factor in taxes, insurance, and utilities, and delays can cost $6,000-10,000 extra. Always build contingency time into your projections.
Holding costs add up quickly and eat into profits. A project that takes 2 months longer than planned could cost an extra $6,000 to $10,000 in holding costs alone. Always budget for delays and build contingency time into your projections.
Mistake 4: Choosing the Wrong Lender
Not all fix and flip lenders are created equal:
- Compare rates, points, and fees from multiple lenders
- Ask about draw processes and timelines
- Verify the lender can actually close on time
- Read reviews from other investors
- Understand extension policies before you need them
The cheapest lender is not always the best choice. A lender who cannot close on time or who makes draw disbursements difficult can cost you more than the interest savings.
How Do You Structure a Profitable Fix and Flip Deal?
Putting together a profitable fix and flip deal requires careful analysis and planning. Here is a framework for evaluating potential projects.
Step 1: Find the Deal
Successful flippers find deals through multiple channels:
- MLS listings (bank-owned, estate sales, price reductions)
- Wholesalers
- Direct mail marketing
- Driving for dollars
- Networking with agents and other investors
- Auctions and foreclosure sales
The best deals rarely fall into your lap. Building systems to consistently source opportunities is essential for long-term success.
Step 2: Analyze the Numbers
Before making an offer, run the numbers carefully:
| Item | Amount |
|---|---|
| Purchase Price | $150,000 |
| Closing Costs (Buy) | $4,500 |
| Renovation Costs | $45,000 |
| Holding Costs (6 mo) | $12,000 |
| Closing Costs (Sell) | $15,000 |
| Total Investment | $226,500 |
| ARV (Sale Price) | $285,000 |
| Gross Profit | $58,500 |
| ROI | 25.8% |
Step 3: Secure Financing
With your analysis complete, approach lenders with:
- Property details and photos
- Repair estimates and scope of work
- ARV analysis with comps
- Your experience and track record
- Proof of funds for down payment and reserves
Step 4: Execute the Renovation
Successful project execution requires:
- Detailed scope of work and timeline
- Reliable contractors with references
- Regular site visits to monitor progress
- Proper permits and inspections
- Draw management with your lender
Step 5: Sell and Repeat
Once renovations are complete:
- Stage the property professionally
- Price competitively based on current market conditions
- Market aggressively across multiple channels
- Negotiate offers and close the sale
- Pay off your loan and calculate actual returns
- Use lessons learned to improve your next project
What Markets Offer the Best Opportunities for Fix and Flip Investors?
While fix and flip opportunities exist in every market, some areas offer better returns than others. Key factors to consider include:
Top Markets for Fix and Flip ROI (2024-2025)
128%
Pittsburgh ROI
112%
Buffalo ROI
105%
Cleveland ROI
98%
Baltimore ROI
- Price-to-rent ratios: Markets where buying is affordable relative to renting often have active investor demand
- Days on market: Faster-selling markets reduce holding costs
- Renovation cost arbitrage: Areas where renovated homes command significant premiums
- Economic growth: Markets with job growth and population increases
Currently, markets in the Midwest and Mid-Atlantic regions often offer strong ROI due to lower acquisition costs and solid rental demand. However, local market knowledge trumps national trends, so focus on becoming an expert in your target area.
How Can You Get Started with Fix and Flip Financing Today?
Getting started with fix and flip financing is easier than many new investors think. Here is your action plan:
- Educate yourself: Read books, take courses, and network with experienced investors
- Build your team: Find a reliable contractor, real estate agent, and lender before you need them
- Analyze deals: Practice running numbers on properties even before you are ready to buy
- Get pre-approved: Talk to fix and flip lenders about your borrowing capacity
- Start small: Your first flip should be a manageable project, not a major renovation
- Learn and iterate: Every project teaches valuable lessons for the next one
Ready to fund your first or next fix and flip project? Contact Clearhouse Lending today to discuss your financing options with an experienced commercial lending specialist. We offer competitive rates, fast closings, and personalized service to help you succeed.
Frequently Asked Questions About Fix and Flip Financing
What credit score do I need for a fix and flip loan?
Most hard money lenders require a minimum credit score of 600 to 620. Higher scores may qualify for better rates and terms.
How much down payment is required?
Typical down payments range from 10% to 20% of the purchase price, plus cash reserves for renovations and holding costs.
How quickly can I get funded?
Hard money loans can fund in as little as 7 days. Bridge loans typically take 10 to 21 days.
Can I get 100% financing for a fix and flip?
Some lenders offer 100% of renovation costs, but you will typically need to bring 10% to 20% of the purchase price as a down payment.
What happens if my project takes longer than expected?
Most lenders offer extension options for an additional fee, typically 1 to 2 points for a 3 to 6 month extension.
Should I use a hard money loan or bridge loan?
Hard money loans are best for quick closings and shorter projects. Bridge loans work better for longer timelines or when you need more flexible terms.
Fix and flip financing provides the speed and flexibility that real estate investors need to capitalize on opportunities. By understanding your options, running accurate numbers, and partnering with the right lender, you can build a profitable house-flipping business. The key is starting with solid fundamentals, learning from each project, and scaling responsibly as you gain experience.