Fix and Flip Loan Guide
Short-term bridge financing for acquisition and renovation. ARV-based underwriting, draw schedules, the BRRRR strategy, and everything real estate investors need to know about fix and flip loans in 2026.
What Is a Fix and Flip Loan?
A fix and flip loan — also called a hard money loan or bridge loan — is short-term financing (typically 6–18 months) used to purchase and renovate a distressed property with the intent to sell it at a profit. Unlike conventional 30-year mortgages, fix and flip loans are designed to close fast, fund renovation costs, and exit cleanly once the property sells.
These loans are almost always provided by private lenders or hard money lenders rather than banks or credit unions. The underwriting is asset-based: the lender cares primarily about the property’s value after renovations (the ARV — after-repair value) rather than your personal income or DTI.
The fix-and-flip market in 2026 remains active in secondary markets, the Midwest, and Southeast where home price-to-renovation cost ratios still allow for profitable spreads. Primary markets (coastal cities) have compressed margins significantly as home prices rose faster than renovation cost efficiency gains.
ARV-Based Underwriting Explained
The most important concept in fix and flip lending is the After-Repair Value (ARV). ARV is the estimated market value of the property after all planned renovations are complete. Lenders underwrite fix and flip loans based on a percentage of ARV — not the as-is purchase price.
| Metric | What It Means | Typical Guideline |
|---|---|---|
| ARV (After-Repair Value) | Projected value after renovation | Determined by lender’s appraisal or BPO |
| LTV on ARV | Max loan as % of ARV | 65%–75% of ARV |
| LTC (Loan-to-Cost) | Max loan as % of total project cost | 85%–90% of purchase + renovation costs |
| As-Is LTV | Loan vs. current as-is value | Secondary constraint — usually 70–80% max |
ARV Calculation Example
You find a distressed property listed at $180,000. After $60,000 in renovations, comparable properties in the neighborhood sell for $320,000. Your estimated ARV = $320,000.
- Total project cost: $180,000 purchase + $60,000 rehab = $240,000
- Max loan at 70% of ARV: $320,000 × 70% = $224,000
- Max loan at 90% LTC: $240,000 × 90% = $216,000
- Lender uses the lower of the two: $216,000
- Your required equity / cash: $240,000 − $216,000 = $24,000
If the property sells for $315,000 after 5 months, your gross profit before carrying costs = $315,000 − $240,000 = $75,000. Subtract loan interest (5 months × ~$1,600 interest-only = ~$8,000) and closing/selling costs (~$18,000) = approximately $49,000 net profit.
Run the numbers on your next fix and flip — purchase price, rehab budget, ARV, carrying costs, and projected profit.
Fix and Flip Loan Requirements
Hard money lenders have flexible underwriting compared to conventional lenders, but they still evaluate borrower experience, credit, and deal quality. In 2026, typical requirements are:
| Requirement | Typical Guideline | Notes |
|---|---|---|
| Minimum credit score | 600–640 | Some hard money lenders go below 600; better credit = better rates |
| Down payment / skin in the game | 10–20% of project cost | First-time flippers often need 20–25%; experienced flippers may get 10–15% |
| Experience requirement | 0–2 flips for many lenders | First-time flippers accepted; experienced flippers get better terms |
| Max LTV on ARV | 65%–75% | 70% most common; some stretch to 75% for strong deals |
| Max LTC (loan-to-cost) | 85%–90% | Includes purchase + renovation budget |
| Loan term | 6–18 months | Extensions available (usually 3-month increments for a fee) |
| Reserves | Minimal — 2–3 months interest | Lower reserve requirement than conventional |
| Property condition | Distressed OK — even uninhabitable | Lenders fund properties conventional lenders won’t touch |
Draw Schedules & Renovation Funding
Fix and flip loans don’t fund the full renovation budget upfront. Instead, renovation funds are held in reserve and released in draws as work progresses. This protects the lender and ensures funds are used for their intended purpose.
How Draws Work
You submit a draw request when a phase of renovation is complete. The lender sends an inspector (or reviews photos) to verify the work is done. Once confirmed, the draw is funded — typically within 24–72 hours. Draws are typically structured around renovation milestones:
| Draw Phase | Work Completed | Example Draw Amount |
|---|---|---|
| Draw 1 | Demo, rough plumbing, rough electrical | $15,000 |
| Draw 2 | Insulation, drywall, HVAC rough-in | $20,000 |
| Draw 3 | Flooring, tile, cabinets, counters | $15,000 |
| Draw 4 | Paint, fixtures, finish work, final punch | $10,000 |
| Total rehab budget | — | $60,000 |
Interest-Only Payments During the Hold
Most fix and flip loans are interest-only for the loan term. You only pay interest on the amount drawn, not the full committed amount. If you’ve drawn $180,000 on a $216,000 loan at 11% annual interest, your monthly payment is $180,000 × (11%/12) = $1,650. Once you draw the remaining $36,000, your payment rises to $216,000 × (11%/12) = $1,980.
Rates, Points & Total Costs
Fix and flip loans are significantly more expensive than conventional mortgages — but they serve a completely different purpose. The higher cost is the price of speed, flexibility, and access to capital for distressed assets.
| Cost Component | Typical Range | Notes |
|---|---|---|
| Interest rate (annual) | 9.5%–13.0% | Varies by lender, borrower experience, credit, and deal quality |
| Origination points | 1.5–3.5 points | 1 point = 1% of loan amount; paid at close |
| Draw inspection fee | $100–$300 per draw | Lender charges per inspection visit |
| Extension fee (if needed) | 0.5%–1.0% of loan | If project runs over term; typically 3-month extensions |
| Prepayment penalty | Usually none or 3–6 months minimum interest | Some lenders charge minimum interest even if paid early |
| Exit fee | 0.5%–1.0% of loan (some lenders) | Not universal — confirm at application |
Total Cost Example (6-month flip)
$216,000 loan, 11% rate, 2.5 points origination, 4 draws at $150/each:
- Origination: $216,000 × 2.5% = $5,400
- Interest (6 months, average balance ~$200,000): $200,000 × 11% × (6/12) = $11,000
- Draw inspections: 4 × $150 = $600
- Total financing cost: ~$17,000
This is your borrowing cost to control a $240,000 renovation project with only $24,000 of your own cash — roughly 7% of the total project budget in financing costs for a 6-month hold.
The BRRRR Strategy
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat — a wealth-building strategy where investors use a fix and flip loan to acquire and renovate a rental property, then refinance into a long-term DSCR or conventional loan once stabilized.
| Step | What Happens | Tool Used |
|---|---|---|
| Buy | Acquire distressed property below market value | Fix and flip / hard money loan |
| Rehab | Renovate to rental-ready condition using draw schedule funds | Draw disbursements from fix and flip loan |
| Rent | Place tenant — establish rental income history | Property management |
| Refinance | Pull equity out via cash-out refinance into long-term DSCR loan | DSCR loan (based on new ARV) |
| Repeat | Use extracted capital to fund the next deal | Recycled equity |
BRRRR Example
Buy distressed property for $150,000. Spend $50,000 in rehab. New ARV = $280,000. Refinance at 75% of ARV = $210,000 DSCR loan. You recover $210,000 − original $200,000 all-in cost = $10,000 cash-back plus own a cash-flowing rental with minimal equity left in. Rent at $2,200/month against a $1,800 PITIA = DSCR of 1.22. Repeat with the recovered capital.
How to Apply & What to Expect
Fix and flip loans close much faster than conventional mortgages — often 5–14 days. Here’s the typical process:
| Step | What Happens | Timeline |
|---|---|---|
| 1. Deal submission | Submit property address, purchase price, rehab budget, ARV estimate, and your experience profile | Day 1 |
| 2. Lender review | Lender underwrites the deal — pulls credit, reviews ARV vs. purchase price, assesses rehab budget reasonableness | Day 1–2 |
| 3. Term sheet issued | Lender provides loan terms: rate, points, LTV, draw schedule structure | Day 2–3 |
| 4. Appraisal / BPO | Lender orders appraisal or broker price opinion to confirm ARV. Some lenders use desktop or drive-by for speed | Day 3–7 |
| 5. Title and docs | Title search, insurance, entity docs (if LLC), and loan documents prepared | Day 5–10 |
| 6. Close | Sign at title company; purchase funded; rehab budget held in escrow | Day 7–14 |
What to Bring to the Lender
For a fix and flip loan: government-issued ID, executed purchase contract, detailed scope of work and rehab budget (itemized by trade), contractor bids or estimates, ARV comps supporting your projected sale price, and your prior flip experience summary (addresses, purchase prices, sale prices, and timelines). First-time flippers should bring especially conservative ARV comps and a detailed rehab breakdown.
Speak with a fix and flip specialist to get your deal reviewed, ARV assessed, and term sheet issued — often within 24 hours.
