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If you’ve ever wanted to profit from buying, renovating, and reselling real estate, you’ve likely heard of fix and flip loans. These short-term financing tools are specifically designed for investors who want to acquire distressed or undervalued properties, rehab them, and sell for a profit—all without using traditional bank loans.
Whether you’re flipping your first home or funding your tenth project, this guide will walk you through exactly how fix and flip loans work, who they’re for, and how to use them to fuel a successful value-add investment strategy.
A fix and flip loan is a short-term, interest-only loan used to finance the purchase and renovation of a property with the intent to sell it quickly for profit.
These loans are typically issued by private lenders or hard money lenders and are based on the after-repair value (ARV) of the property—not just the current condition.
Some lenders will fund up to 90% of the purchase price and 100% of the rehab budget, depending on your experience and the property’s ARV.
Feature | Typical Range |
Loan Term | 6 to 18 months (renewable in some cases) |
Interest Rate | 8% – 12% (interest-only payments) |
Loan-to-Cost (LTC) | Up to 90% of purchase price |
Loan-to-Value (ARV) | Up to 70–75% of ARV |
Rehab Financing | Up to 100% (funded in draws) |
Credit Score | 620+ (some lenders are flexible) |
Speed of Close | 7–15 business days (quicker than banks) |
Prepayment Penalty | Rare or none |
Find a distressed, undervalued, or off-market property that has upside potential with cosmetic or structural improvements.
You or your contractor will submit a scope of work and projected after-repair value (ARV) to the lender.
The lender reviews:
Once approved, you close fast (7–14 days). Funds for the rehab are typically held in escrow and released in draws as work is completed.
When the flip is complete, you sell the property (ideally at or above ARV) or refinance into a long-term rental loan.
Investor: Sara buys a distressed single-family home for $160,000
Rehab Budget: $40,000
After-Repair Value (ARV): $275,000
Fix and Flip Loan Terms:
After renovation, she lists and sells the property for $270,000. After paying back the loan and expenses, she nets a $40,000+ profit.
Feature | Fix and Flip Loan | Traditional Mortgage |
Use Case | Short-term investment | Long-term occupancy |
Underwriting | Based on ARV and project plan | Based on income and credit |
Speed of Approval | Fast (7–15 days) | Slow (30–45 days) |
Property Condition | As-is or distressed OK | Must be move-in ready |
Ownership Type | Individual or LLC | Typically individual |
Fix and flip loans are an essential tool in the real estate investor’s arsenal—providing fast, flexible capital to buy, renovate, and profit from undervalued properties.
By focusing on ARV instead of income, these loans give you the leverage to scale faster, especially in hot or distressed markets.If you’re ready to get hands-on with a project and unlock equity through smart renovations, a fix and flip loan might be your path to your next (or first) profitable deal.
Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.