How do fix and flip loans work?
Fix and flip loans are short-term (6-18 months) financing covering 70-90% of purchase and up to 100% of renovation. Rates run 8-15% from hard money lenders. Successful flippers follow the 70% rule: total cost should not exceed 70% of after-repair value.
Key Takeaways
- Fix and flip loans are short-term financing (6-18 months) designed for purchasing and renovating properties for resale
- Hard money lenders are the primary source, offering 70-90% of purchase price and 100% of renovation costs
- Interest rates typically range from 8% to 15% with 1-3 points in origination fees
- Successful flippers maintain a 70% rule: purchase price plus rehab should not exceed 70% of after-repair value
- DSCR and bridge loan alternatives exist for investors who plan to hold properties as rentals after renovation
8-15%
Typical interest rate range for fix and flip loans
Source: American Association of Private Lenders
70%
Maximum combined cost-to-ARV ratio recommended for profitable flips
Source: National Association of Realtors
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