Fix and flip loans: how real estate investors fund rehab projects
Jacob Shimon is a professional finance writer at eBoost Partners with over seven years of experience in the commercial lending industry. A graduate of the University of Florida’s Warrington College of Business with a degree in Finance, he specializes in breaking down complex business lending topics to help entrepreneurs make smart, informed decisions.
Fix and flip loans are short-term financing designed for buy-renovate-sell investment projects. They typically cover 80–90% of purchase price and 100% of rehab costs, up to 70–75% of the after-repair value. Terms run 6 to 18 months at rates of 9–13%, with rehab funds released in stages as work progresses.
The fix-and-flip model sounds simple on paper: buy cheap, renovate, sell for a profit. The financing is where most first-time investors get tripped up.
A fix and flip loan isn’t just a mortgage on a distressed property. It’s a construction draw product wrapped around a short-term acquisition loan. The lender is underwriting not just what the property is worth today, but what it’ll be worth when you’re done – and whether you can actually get it there on time and on budget.
I’ve worked with clients who had excellent instincts for property and renovation scope, but who came to us with loan structures that didn’t match what they were trying to do. Getting the financing right from the start changes the entire math of a flip.
What is a fix and flip loan?
A fix and flip loan is a short-term financing product that covers both the acquisition of an investment property and the cost of rehabilitating it. Unlike a conventional mortgage, it’s built for properties that are not currently livable or market-ready – the whole point is to get them there.
These loans function as a form of bridge financing. You borrow against the property’s projected post-renovation value (ARV), complete the work, and then sell the property before the loan matures. The profit from the sale pays off the loan.
Fix and flip loans are most commonly originated by hard money lenders, private credit funds, and specialty investment property lenders. Banks rarely offer them in a true draw format. Loan amounts typically run from $50,000 on the low end to $3M or more for larger projects.
At eBoost Partners, we work with lenders who specialize in this product – lenders whose entire process is built around the speed and flexibility that flip investors need. That matters when you’re under contract with a 10-day close deadline.
How fix and flip loans work
The loan is structured in two parts: the acquisition component and the renovation component. At closing, you receive the acquisition funds to purchase the property. The renovation budget goes into a controlled draw account and gets released in stages.
Here’s how the math works on a typical deal. You find a property, purchase price $150,000. Your renovation budget is $50,000. Your ARV estimate – backed by comparable sales – is $300,000. At 70% of ARV, the lender will provide up to $210,000. Your acquisition loan is $120,000 to $135,000 (80–90% of purchase price), and the remaining $75,000 or so covers some or all of the $50,000 renovation budget, leaving you with capital to close.
Payments during the renovation period are interest-only. You’re not paying down principal. At the end of the term – typically 12 months – the balloon payment comes due. That’s when the property needs to be sold or the loan needs to be refinanced.
Draw inspections happen at agreed-upon milestones. When rough electrical is complete, you submit a draw request. The lender or a third-party inspector verifies the work, and the funds are released – usually within 2 to 5 business days. This process repeats for each phase of the renovation.
Closing is fast compared to conventional financing – often 7 to 14 days. Real estate financing specialists understand the urgency that most flip deals require.
Why it matters for your financing
Honestly, the product only makes sense if you understand that you’re borrowing against the future value of the property – and that future value has to be real.
If your ARV is $300,000 but the comps support $265,000, the lender’s underwriter will catch it. Your loan amount will be based on the lender’s ARV, not yours. That changes your numbers significantly.
What I tell my clients during our first call is this: the financing is a mechanism. The deal is what you need to get right first. Run your numbers with realistic ARV, realistic renovation costs, and a realistic timeline – then see if there’s a loan structure that fits. Not the other way around.
Fix and flip financing gives investors access to deals they couldn’t touch with conventional financing. Properties with deferred maintenance, unpermitted work, structural issues, or severe cosmetic damage don’t qualify for standard mortgages. A fix and flip lender can get you into that deal.
The cost is higher than conventional – rates of 9–13% plus origination points – but the carrying period is short. If you complete and sell in 8 months, you’re paying those rates for 8 months, not 30 years. The absolute dollar cost of the interest is often manageable relative to the profit margin on a well-executed deal.
Key components of a fix and flip loan
After Repair Value (ARV). The single most important number in your deal. Lenders underwrite to ARV – typically 70–75% – so an accurate ARV determines everything: your loan amount, your required capital, and your exit margin.
Loan-to-cost (LTC). Some lenders use LTC as a separate measure – the loan amount relative to total project cost (purchase + renovation). LTC of 85% means you need 15% in the deal as equity. This can be a binding constraint separate from the ARV cap.
Draw schedule. Renovation funds are released in phases tied to inspected completed work. Typical draw milestones: demo and framing, rough mechanicals (electrical/plumbing/HVAC), drywall and finishes, final completion. Each draw requires inspection and lender approval.
Term length. 6 to 18 months is standard. Most experienced flippers use 12-month terms, with extension options available at 1–2 points per 3-month extension. Budget for the extension – most projects run at least slightly over schedule.
Interest rate. 9–13% is the current range in 2025. Rate depends on lender, borrower experience, deal specifics, and market conditions. Payments are interest-only during the renovation period.
Origination fees. Typically 1–4 points at closing. On a $250,000 loan at 2 points, that’s $5,000 upfront. Factor this into your project budget.
Experience tier. Most fix and flip lenders tier their programs by borrower experience. First-time investors get lower LTV (maybe 65% of ARV) and tighter underwriting. Investors with 5+ completed flips may access 75–80% LTV and faster draw processes.
Fix and flip loan requirements and thresholds
Loan amounts: $50,000 to $3M for most programs. Below $50K is hard to find financing for. Above $3M, you’re typically working with portfolio lenders or institutional private credit.
ARV cap: 70–75% is standard. Some aggressive lenders go to 80% for experienced borrowers with strong exit plans, but that’s the exception.
Purchase price coverage: 80–90% of the as-is purchase price is typical. You need to bring the other 10–20% to closing as equity.
Renovation coverage: Many programs cover 100% of the approved renovation budget, held in escrow and released via draws. Your cash contribution covers the equity gap at purchase, not the renovation itself – a significant advantage.
Credit score: Requirements vary by lender but 620–640 is a common floor. More important is the deal quality and your experience. A strong deal with a 630 score often gets done. A weak deal with a 750 score is harder to place.
Experience documentation: First-time investors should expect to document their project plan in detail and may face more conservative LTV. Previous flip experience – purchase price, renovation cost, sale price, timeline – should be documented and ready to provide.
Exit documentation: Lenders increasingly ask for evidence of your exit plan. That might mean a comparative market analysis supporting your ARV, or a preliminary conversation with a listing agent about the property’s resale position.
Common fix and flip loan challenges
Budget overruns are the number one deal killer. A renovation that budgets $40,000 and comes in at $70,000 is a crisis – the lender won’t release more than what was approved. The gap comes out of your pocket or work stops. I’ve worked with clients who needed emergency capital mid-flip, and it’s not a comfortable position.
Timeline overruns compound the budget problem. If you planned to sell in month 10 and you’re at month 13 with construction still ongoing, you’re now paying interest on a property that isn’t generating revenue and may need a loan extension at additional cost.
ARV compression happens when the market shifts between when you started the project and when you’re ready to sell. A 5% drop in market prices can turn a profitable flip into a breakeven or worse. This is a market risk that no loan structure can fully protect against – it’s a reason to build conservatism into your ARV assumptions from the beginning.
Contractor issues are operational but they create financing problems. A contractor who walks off the job mid-project, or one who does shoddy work that fails inspection, can stall your draw process and delay your timeline. Lender inspectors are not forgiving about incomplete or incorrect work.
Draw processing delays can cause friction with contractors. If your lender takes 7–10 days to release a draw, and your GC needs payment to continue, you may face work stoppages. Ask about typical draw turnaround times before you commit to a lender.
For context on how fix and flip financing compares to related products, the real estate investor guide covers the full picture.
How to improve your position for fix and flip financing
Build a detailed, line-item renovation budget before you approach a lender. Room by room, trade by trade. This document is what lenders use to set your draw schedule. A vague $50,000 estimate isn’t underwritable. A $47,500 budget broken down by demo, plumbing, electrical, HVAC, drywall, flooring, kitchen, baths, exterior, and landscaping is.
Get your ARV analysis from a local source. The best version is a signed letter from a licensed appraiser with comparable sales within 0.5 miles and 90 days. Second best is a detailed CMA from a real estate agent who has sold properties in the same neighborhood. Avoid relying solely on automated valuations – lenders know they’re unreliable on distressed properties.
Document your experience. If you’ve done flips before, prepare a track record: address, purchase price, renovation budget, actual renovation cost, sale price, and timeline for each. Two or three successful completions changes your lender options meaningfully.
Have a GC relationship established before you apply. Lenders want to know who’s doing the work. An established contractor with a license, insurance, and references is much better for your application than “I’m getting bids.”
Know your exit cold. Most lenders will ask: who’s selling this property and at what price? Have a listing agent relationship and a realistic sale price range based on current comps, not peak comps from 18 months ago.
Build in a 15–20% contingency on your renovation budget. Tell your lender about it. It shows maturity and protects you from the overrun problem that sinks most first-time flippers.
If you’re considering holding the property as a rental if it doesn’t sell at target price, run the DSCR numbers before you close. It’s your backup exit – know whether it works.
Tools and resources
Comparable sales analysis is your most important pre-deal tool. Platforms like Redfin and Zillow give you a starting point, but for accuracy, work with a local agent who can pull MLS data on truly comparable properties – same size, same condition post-renovation, same neighborhood. Pay attention to days on market, not just sale price.
Renovation cost estimation: The RSMeans database is the industry standard for construction costs by trade and geography. For investors doing multiple projects, developing a relationship with a contractor who can walk properties and give reliable estimates is worth more than any software tool.
For understanding how fix and flip financing fits within the broader construction lending space, the construction loan guide is a useful companion resource – especially if you’re considering new builds or larger development projects alongside your flip activity.
The business financing guide is also worth reviewing if you’re structuring your flip business as an LLC or S-corp – the financing options available to you may expand as your entity matures.
Financing options related to fix and flip loans
Hard money loans are the closest cousin to fix and flip financing – often the same lenders offer both. The distinction is that a fix and flip loan is purpose-built with a draw mechanism for rehabilitation projects. A generic hard money loan might not include that structure. If your deal involves significant renovation, a purpose-built fix and flip product usually serves you better. See the hard money loan guide for a side-by-side comparison.
FHA 203(k) loans are a government-backed option that allows owner-occupants to purchase and renovate in a single loan. They’re not available to investors – only owner-occupants qualify. They’re also slow (60+ days) and require significant documentation. Mentioning it here because investors sometimes ask: 203(k) isn’t for you unless you’re planning to live in the property.
DSCR loans become relevant if your exit is a rental hold rather than a sale. After renovation, if the property generates strong rental income, a DSCR refinance replaces your fix and flip loan with long-term debt at a significantly lower rate. Run those numbers before you commit to the flip – it’s valuable to know your fallback position.
Bridge loans are sometimes used for stabilization projects that are less renovation-intensive – buying a property with existing tenants, making cosmetic improvements, and refinancing into permanent financing. The timeline and draw structure differ from a full fix and flip.
At eBoost Partners, we can help you structure the right product for your specific project. Apply now and we’ll review your deal, help you think through the numbers, and match you with the right lender for what you’re trying to do.
Disclaimer: The information in this article is for educational and informational purposes only and does not constitute financial advice. All funding products, rates, and terms are provided by eBoost Partners and are subject to application, credit approval, and our current underwriting criteria. Rates and terms are subject to change without notice.
Frequently asked questions
Do I need experience to get a fix and flip loan?
No – but experience changes your terms. First-time flippers can absolutely get fix and flip financing. Expect a lower loan-to-ARV ratio (often 65% versus 70–75% for experienced investors), more documentation requirements, and closer scrutiny of your renovation budget and contractor.
Some lenders require first-time investors to use a licensed general contractor rather than self-managing subcontractors.
As you build a track record – even one or two completed flips – your options and leverage improve significantly.
Does a fix and flip loan cover renovation costs?
Yes, that’s the defining feature of the product. The renovation budget is included in the loan, held in a controlled draw account, and released in stages as work is completed and inspected.
Most programs cover 100% of the approved renovation budget, which means you’re not bringing cash to fund the rehab – just the equity gap at purchase. The key word is “approved”: the lender reviews and approves your renovation scope at origination.
If you want to add scope or change the budget mid-project, you’ll need to go back to the lender for an amendment, which isn’t always possible.
What happens if my project goes over budget?
This is one of the most important questions to ask before you start. The short answer: it’s your problem, not the lender’s. The lender has committed to funding your approved budget and nothing more. If renovation costs exceed that number, you need to cover the difference out of pocket – or find a way to reduce scope to fit the remaining draws.
In extreme cases, investors have had to seek emergency hard money second-position loans to complete projects, which adds cost and complexity. The practical lesson: build a 15–20% contingency into your budget from day one, and treat it as money you expect to use, not money you hope you don’t need.