How Fix & Flip Financing Works
Fix-and-flip loans are short-term, asset-based loans designed to fund both the purchase and renovation of an investment property. The goal: buy, improve, and sell (or refinance) — all within 6 to 18 months.
Unlike conventional mortgages, flip loans are underwritten primarily on the deal, not the borrower's personal income. Lenders look at:
- Purchase price vs. market value
- Renovation budget and scope
- After-repair value (ARV)
- Exit strategy (sell or refinance)
- Borrower experience
Typical Loan Structure
| Component | Typical Range |
|---|---|
| Purchase LTV | 80–90% of purchase price |
| Rehab Financing | Up to 100% of rehab budget |
| Combined LTV | Up to 70–75% of ARV |
| Term | 6–18 months |
| Rate | 9–13% (varies by experience and deal) |
| Points | 1–3 points |
The Draw Schedule
Renovation funds aren't released all at once. Instead, they're distributed through a draw schedule — milestone-based releases that protect both you and the lender.
Typical draw process:
- 1Complete a phase of work (e.g., framing, plumbing, electrical)
- 2Request a draw from the lender
- 3Lender sends an inspector to verify completion
- 4Funds are released for the completed work
Calculating Your Flip Profit
Before committing to a deal, model the full cost stack:
- Purchase price
- Closing costs (buying)
- Rehab budget
- Holding costs (interest, taxes, insurance, utilities)
- Selling costs (agent commissions, closing costs)
- Loan costs (points, fees)
Projected Profit = ARV – Total Costs
Use our Fix & Flip Calculator to model a specific deal.
Common Mistakes
- 1Underestimating rehab costs — always add a 10–15% contingency
- 2Overestimating ARV — use conservative comps
- 3Ignoring holding costs — interest accrues every month
- 4No exit strategy — have a plan B if the market slows
Getting Started
The best way to evaluate a flip deal is to run the numbers first, then talk to a lender. schedule with a Prime Advisor to discuss your next project, or use our Fix & Flip Calculator to model your deal.