Comprehensive Investor’s Guide to Fix and Flip Loans: From Purchase to Payoff

A flip is a construction project with a closing date at each end. The loan behind it has to behave like a project partner: money at purchase, money as the work gets done, and patience that matches the real timeline instead of the optimistic one on your spreadsheet.

We’ve lent to real estate investors out of Tampa since 1998, and the pattern is consistent. Flips rarely fail because the investor picked the wrong house. They fail because three ordinary things slip a little at once: the renovation costs more, the finished value comes in lower, and the calendar runs long. A good loan structure, and a good stress test, absorbs most of that.

This guide walks through how a fix and flip loan works, how rehab draws are released, which renovations are worth their cost, and two worked examples with the math, including what happens when things go sideways. It’s written for investors working anywhere in the US, from first-time flippers to operators running several projects at once.

How a fix and flip loan works

A fix and flip loan finances the purchase of an investment property and the renovation that makes it sellable, in a single loan. We underwrite the deal: the purchase price, your rehab budget, and the after-repair value (ARV) of the finished property. Your personal income and tax returns aren’t part of that equation, which is why the loan works as readily for self-employed investors, LLCs, and foreign nationals as for anyone else.

Money moves in two stages. At closing we fund your share of the purchase. The rehab portion is held back and released in staged draws as work is completed, so you aren’t paying interest on dollars that haven’t gone into the house yet. During the flip you pay interest only.

Our quote form asks for six things: purchase price, rehab funds, ARV, estimated FICO, requested loan amount, and the property address. It also asks whether you’re the principal or a broker, because we work with both. The quote is free and requires no credit pull.

The three numbers: purchase, rehab, ARV

Every flip rests on three figures, and our program uses all of them to size your loan. You receive the lowest of three limits: 95% of total cost, 90% of the purchase price plus 100% of the rehab budget, and 75% of ARV. Which one binds depends on the deal. Buy cheap with a modest rehab and the purchase-and-rehab limit usually governs. Buy where the finished value is thin relative to your cost and the ARV cap takes over.

Take a cosmetic flip: purchase $180,000, rehab $35,000, ARV $265,000.

Here the loan is $197,000. You fund the remaining $18,000 of cost plus points. Notice how close the three limits are: a modest drop in ARV would flip the binding limit to the ARV cap and shrink your loan, which raises the cash you need at the closing table. That’s why we say ARV is the number to be most skeptical about. Build it from recent sold comparables of similar size and finish, not from listings or from what you hope to list at.

How rehab draws work

Draws are the part of a fix and flip loan that surprises first-time borrowers, so it’s worth walking through. In a typical draw process you complete a stage of work, request a draw, the work is verified (usually by inspection or documented photos), and funds are released. Your term sheet spells out the specifics, but the rhythm is always the same: work first, then reimbursement or release.

That rhythm has a financial upside. Because interest accrues on the balance actually funded, a draw-based loan costs less than borrowing everything on day one. Consider a heavy rehab: $210,000 purchase, $90,000 rehab, and an 8-month hold in which four equal draws of $22,500 are released at the end of months one through four.

At an illustrative 9.49%, interest on the drawn balance comes to about $15,872. Charge the same rate on the full $279,000 for all eight months and it’s $17,651. The draw structure saves roughly $1,780 without anyone negotiating anything. A few habits keep draws moving: document progress cleanly, pay your subcontractors promptly, sequence structural and mechanical work before cosmetic work, and never overstate percent complete. Inspectors notice, and a rejected draw stalls the whole schedule.

Which renovations earn their cost

Not every dollar of rehab returns a dollar at resale. Zonda’s 2025 Cost vs. Value report, which surveys real estate professionals on what finished projects add to a sale price, found that eight of the ten highest-returning projects were exterior work. Garage door replacement averaged $4,672 and was credited with $12,507 in resale value (a 267.7% return). A steel entry door averaged $2,435 and returned 216.4%, and manufactured stone veneer returned around 206%. Major kitchen remodels, by contrast, recouped only about half their cost.

The takeaway for flippers: spend first where buyers see the house first, and be disciplined on full interior gut jobs, which buyers often want to personalize anyway. Also sanity-check your budget against ATTOM’s observation that flipping veterans typically estimate rehab and other expenses at 20% to 33% of ARV. Our two examples below put rehab alone at about 13% and 24% of ARV, before holding and selling costs.

Example 1: the cosmetic flip

Paint, flooring, fixtures, landscaping, and a new garage door on a sound three-bedroom. As shown earlier, the loan is $197,000. We use 9.49% and 2 points to stay conservative, and, to keep things simple, charge interest on the full loan balance.

It works, but notice how thin it is: $18,162 is under 7% of ARV. A lower rate helps, though. At 7.875% instead of 9.49%, six months of interest drops by about $1,590 and profit rises to roughly $19,750. Also note the 70% rule of thumb (maximum offer equals 70% of ARV minus rehab) would cap this purchase near $150,500, well under the $180,000 paid. Plenty of 2026 markets simply don’t offer 70% deals, but a thin margin is a signal to inspect every assumption twice.

Example 2: the heavy rehab

A dated, tired house getting new mechanicals, a reworked kitchen and baths, and an exterior refresh. The three limits are $285,000 (95% of cost), $279,000 (90% of purchase plus 100% of rehab), and $285,000 (75% of ARV), so the loan is $279,000.

Here the rehab is about 24% of ARV, squarely inside the range ATTOM cites. The return on cash is healthy because leverage is doing the heavy lifting, but the dollars are modest for the risk and effort involved, and that sets up the most important section of this guide.

Stress-testing the deal

Now run Example 2 through three ordinary misses: ARV comes in 5% lower ($361,000), the rehab runs 15% over budget ($13,500 you fund yourself), and the project takes two extra months. To stay conservative, every scenario below charges interest on the full loan balance, so the baseline is $30,169 rather than $31,948. Note also that at the lower ARV the 75% cap drops the loan to $270,750.

This is how flips usually go wrong: not through one disaster, but through three small slips compounding. It’s also why 12-18 month terms with extension options matter. A project that needs another month shouldn’t have to be dumped at a discount to beat a maturity date. Ask what an extension costs before you need one.

Your exit: sell or hold?

The default exit is a sale, but a flip that stalls, or a market that softens, gives you a second option: keep the property as a rental and refinance out of the short-term loan. It’s worth running the numbers before you buy, because the refinance rarely returns your cash the way flippers expect.

Return to the heavy-rehab example. With a $380,000 ARV, a long-term refinance at 75% of ARV is a $285,000 loan. The hard money payoff is $279,000, so the refinance leaves only $6,000, which about $8,550 in estimated closing costs (3%) more than consumes. Your original cash stays in the deal.

Neither exit is better in the abstract. Selling converts the project to cash and lets you recycle capital into the next deal. Holding builds long-term wealth but ties up your money and has to clear a rent test. Decide which exit you’re underwriting before you buy, and keep the other as your backup. When you’re ready to hold, our DSCR loans qualify on the property’s rental income rather than your own.

What you can flip, and where

We finance flips across a wide range of property types, and each behaves differently:

• Single-family homes: the core of flipping, with the deepest buyer pool and the easiest comps.
• Condos: lower rehab scope, but HOA rules, special assessments, and buyer-financing approvals can slow a sale.
• 2-4 unit properties: appeal to both owner-occupants and landlords, which widens your exit options.
• 5-150 unit multifamily and mixed-use: value-add plays where rent growth and lease-up, not just finishes, drive value.
• Light industrial and small commercial: longer timelines and leasing risk, so underwrite the exit especially carefully.

Geography matters just as much as property type. ATTOM’s Q2 2026 report counted 77,991 flips, or 6.2% of all US home sales, with the typical flip taking 161 days from purchase to resale. The typical profit margin was 21.5%, down from 25.7% the previous quarter and 27.6% a year earlier, and margins fell from the prior quarter in 126 of the 186 metro areas ATTOM analyzed. Those margins are gross: ATTOM excludes rehab and other expenses. Pick a farm area, learn its sold comps cold, and treat national averages as context, not a forecast.

How we get you funded

We’ve been a direct lender since 1998, which means the people reviewing your deal are the people funding it. Our process is built around speed without cutting corners:

• Asset-based underwriting. We size the loan on the deal, with no tax returns or income verification.
• A quote before you commit. The free quote needs no credit pull, so you can compare offers without leaving a footprint.
• A clean closing file. Send the purchase contract, a line-item rehab budget, entity documents if you’re closing in an LLC, proof of your cash to close, and an insurance quote.
• Entities and foreign nationals welcome. LLCs, partnerships, and foreign nationals can all close.
• Brokers welcome. Submit your borrower’s deal as a broker through the same form.

What slows a closing? A late valuation, a title problem, a missing operating agreement, an uninsured property, or a vague scope of work. Fix those up front and “as fast as 5 days” becomes realistic. Questions on a specific deal? Call (800) 826-5077.

Things to consider before you sign

1. 1

   Know your maximum offer. Work backward from ARV: subtract rehab, financing, holding and selling costs, and your required profit. Don’t work forward from the asking price.

2. 2

   Vet your contractor. Verify the license and insurance with your state, check references, insist on a written line-item scope, and align the payment schedule with your draw schedule.

3. 3

   Pull permits. Unpermitted work can stall an inspection, an appraisal, or a buyer’s financing.

4. 4

   Mind lead-safe rules. For homes built before 1978, federal law generally requires lead-safe work practices by certified renovators. See the EPA’s RRP program before you demo.

5. 5

   Insure the project. Vacant and under-renovation properties often need specialized coverage. Check flood zones on the FEMA Flood Map Service Center.

6. 6

   Add contingency. Budget 10-15% above your rehab estimate, plus schedule cushion. Behind-the-wall surprises are the rule, not the exception.

7. 7

   List every carrying cost. Interest, taxes, insurance, utilities, HOA dues, and lawn care all run while you renovate and while you list.

8. 8

   Understand your extension options. Know the cost, the conditions, and how early you need to ask.

9. 9

   Have a plan B exit. If the market softens, renting the property and refinancing into a DSCR loan can keep the deal alive.

10. 10

    Plan for taxes. Flip profits are commonly taxed as ordinary income. IRS Publication 544 covers sales of property, and a CPA who works with investors is worth the fee.

Trusted references for your due diligence

Check comps, costs, codes, and taxes with independent sources before you commit capital. These are the resources we point investors to.

Government and regulators

Industry data and research

Quick answers