Fix and Flip

A fix and flip loan is short-term financing that real estate investors use to buy and renovate a property in order to resell it for a profit, a process known as house flipping. The best point of this type of loan is a Fix and Flip lender will typically lend on a property that will not qualify for standard financing due to its condition. To determine the amount of funding you’re eligible to receive for your loan, the lenders may use the loan-to-value and after-repair value.

The loan-to-value ratio, or LTV, compares your loan size to the value of the property. The maximum LTV available for fix and flip loans is typically 80% - 90% depending on the borrower's experience. In addition, you can finance 100% of the Renovation Costs. For example, if you’re buying a $100,000 property, a lender who provides 90% LTV will lend you $90,000. You have to provide the remaining $10,000 as a down payment.

Whereas LTV is often used for standard real estate loans, after-repair value, or ARV, tends to be used more frequently with fix and flip loans.  ARV is an appraiser’s estimate of the property’s value after renovations are finished.

For example, if a lender offers 70% ARV, it will lend a maximum of $140,000 on a home that will be worth $200,000 after repairs. You can usually borrow more money from a lender that bases its loan sizes on ARV.

If you want to learn more about this special purpose loan, contact us today to discuss your project with an experienced loan officer!