Fix & Flip Loans: Your Guide to House Flipping

House flipping has created serious wealth for savvy investors—but you need the right financing to make it work. Fix and flip loans are designed specifically for investors who want to buy properties, renovate them, and sell for a profit. Let's dive into how these specialized loans work.

What Is a Fix and Flip Loan?

Fix and flip loans are short-term financing options (typically 6-18 months) designed for real estate investors. Unlike traditional mortgages, they cover both the purchase price AND renovation costs, then get paid off when you sell the property. They're fast, flexible, and built for investors—not homeowners.

How Fix and Flip Loans Work

1. Find a Deal: Identify an undervalued property with profit potential
2. Get Pre-Approved: Know your loan amount before making offers
3. Purchase: Close quickly (often 2-3 weeks) to beat competition
4. Renovate: Draw funds in stages as work is completed
5. Sell: Pay off the loan and pocket your profit

Types of Fix and Flip Financing

Hard Money Loans

The most common fix and flip option. Asset-based lending that focuses on the property's value—not your income. Fast approval (days, not weeks), but higher rates (10-15%) and points (2-4).

Private Money Lenders

Individuals or small groups who lend their own capital. Terms vary widely, but relationships can lead to better deals over time.

DSCR Loans for Flippers

Some DSCR lenders offer products for experienced flippers. Lower rates than hard money but may require more experience and higher credit scores.

Business Lines of Credit

For experienced flippers with strong business credit. Draw funds as needed, pay interest only on what you use.

Fix and Flip Loan Terms

• Loan Amount: Up to 90% of purchase + 100% of renovations
• Interest Rates: 9-15% (higher than traditional mortgages)
• Points: 2-4 points upfront (% of loan amount)
• Term: 6-18 months typically
• Down Payment: 10-20% of purchase price
• Closing Time: 7-14 days (much faster than banks)

What Lenders Look For

• Experience: First-timers can qualify but may face tighter terms
• Credit Score: 650+ for most lenders (some go lower)
• Cash Reserves: Proof you can cover unexpected costs
• The Deal: Strong ARV with realistic renovation budget
• Exit Strategy: Clear plan to sell or refinance

Tips for Successful Flipping

1. Know your market: Understand what buyers want in your area
2. Build accurate budgets: Add 10-20% contingency for surprises
3. Work with reliable contractors: Delays kill profits
4. Don't over-improve: Match renovations to the neighborhood
5. Factor ALL costs: Holding costs, selling costs, interest payments
6. Have an exit plan B: What if it doesn't sell quickly?

First Flip? Start Here

New to flipping? Consider these strategies to reduce risk:

• Partner with an experienced flipper on your first deal
• Start with cosmetic renovations (paint, flooring, fixtures)
• Stay local so you can manage the project closely
• Have reserves for at least 6 months of holding costs

Have a property in mind? Call me at (847) 863-2022 or email bduran@newnhm.com. I'd love to help you crunch the numbers.