The Complete Guide to Fix & Flip Financing in 2024

Fix and flip investing remains one of the most popular strategies for real estate investors looking to generate quick profits. But the success of any flip depends heavily on how you finance it. In this comprehensive guide, we'll cover everything you need to know about fix and flip financing in 2024.

What Is Fix & Flip Financing?

Fix and flip loans are short-term, asset-based loans designed specifically for investors purchasing properties to renovate and sell for profit. Unlike traditional mortgages, these loans focus on the property's after-repair value (ARV) rather than your personal income or credit score.

The key advantage is speed and flexibility. Traditional banks can take 30-45 days to close, while fix and flip lenders can fund in as little as 5-14 days. In competitive markets, this speed can be the difference between winning and losing a deal.

Types of Fix & Flip Homes Loans

Hard Money Loans

Hard money loans from private lenders are the most common financing option for fix and flips. They're asset-based, meaning the property serves as collateral. Interest rates typically range from 8-15%, with points (fees) of 1-3% of the loan amount. Terms are usually 6-18 months.

Asset-Based Lending

Similar to hard money but often with more flexible terms. Lenders like LoanExis evaluate the deal's potential rather than just your credit score. We look at the purchase price, renovation budget, and ARV to determine loan amounts up to 90% of purchase and 100% of rehab costs.

Cash-Out Refinance

If you own existing properties with equity, you can refinance to pull cash out for your flip. This can be cheaper than hard money but takes longer to close. Many investors use this as a source of down payment funds.

How to Qualify for Fix & Flip Financing

While requirements vary by lender, most fix and flip loan approvals consider:

• Property details: location, purchase price, and renovation scope
• After-repair value (ARV) supported by comparable sales
• Your experience level as an investor
• Cash reserves for down payment and carrying costs
• Credit score (often flexible, with 620+ preferred)
• Exit strategy: resale or refinance plan

Understanding LTV and ARV

Two critical metrics in fix and flip financing are Loan-to-Value (LTV) and After-Repair Value (ARV). LTV refers to the loan amount as a percentage of the current property value. ARV is the estimated value after all renovations are complete.

For example, if you're buying a property for $150,000 that needs $50,000 in renovations, and the ARV is $275,000, a lender offering 90% LTV on purchase and 100% of rehab might lend you $135,000 + $50,000 = $185,000. You'd need to bring $15,000 as down payment plus closing costs.

The Draw Process for Renovation Funds

Unlike a traditional mortgage where you receive all funds at closing, fix and flip loans typically release renovation funds in "draws" as work is completed. This protects both you and the lender by ensuring funds go toward actual improvements.

The typical draw process works like this: You complete a phase of renovation (e.g., demolition, framing, electrical), submit a draw request with photos and documentation, the lender inspects (often virtually), and funds are released within 24-48 hours.

Common Mistakes to Avoid

• Underestimating renovation costs by 10-20%. Always budget a contingency.
• Overestimating ARV. Be conservative with your comparable sales analysis.
• Ignoring holding costs. Factor in interest payments, insurance, taxes, and utilities.
• Choosing the wrong lender. Compare terms, fees, and track record before committing.
• Not having a backup exit strategy. Markets can shift—have a Plan B.

Getting Started with Fix & Flip Financing

Ready to finance your first—or next—fix and flip? The process is straightforward: find a property, run your numbers, and submit your deal for review. At LoanExis, we provide term sheets within 24 hours and can close in as little as 7 days.

Use our Deal Analyzer tool to quickly estimate if your numbers work before submitting. This free tool calculates your potential profit, cash needed, and financing options based on your deal parameters.