Your first flip is exciting. It is also the one where you learn what a “small surprise behind the drywall” costs. A good loan will not remove the surprises, but it can keep the financing from being one of them.
This guide covers how a Fix & Flip loan works, what to expect, and what trips up first-timers. Everything here is for business-purpose investing, not for a home you plan to live in.
What a Fix & Flip loan actually is
It is one loan that covers both the purchase and the rehab. You do not need one lender for the house and another for the repairs. You also do not need to pay for the whole renovation out of pocket and hope for the best.
Here are the basics:
- Purchase + rehab in one loan.
- 0 to 10% down, depending on the project.
- No experience needed. First flip, fifth flip, same conversation.
- No appraisal on most deals.
- Closes in 3 to 5 days.
That speed matters. Sellers of distressed properties often want a fast close, and an investor who can actually deliver wins the deal.
How the process runs
1. Find the deal
You do the hard part: finding a property with room to add value. Before you make an offer, send it to me. I will tell you quickly whether it is financeable and what the structure would look like.
2. Build the numbers
Good flips are built on three numbers:
- Purchase price
- Rehab budget, meaning every line item, plus a cushion
- ARV, the after-repair value, or what it should sell for when finished
If those three numbers do not leave you profit after holding costs, selling costs, and a bad week, the deal needs work. Or it needs a pass.
3. Put together a scope of work
A scope of work is a written list of exactly what is being done and what it costs. Kitchen, baths, flooring, roof, paint, whatever applies. This backs up your budget and tells everyone involved how the money will be used.
4. Close fast
Because most deals skip the appraisal, closing can happen in 3 to 5 days. Have your entity paperwork ready if you are buying in an LLC.
5. Draws
Rehab funds are usually released in stages as work gets done, in what is called a draw schedule. You finish a phase, it gets verified, and the next chunk is released. Plan your cash flow around that, and keep a relationship with a contractor who understands it.
6. Sell or refinance
When the work is done, you sell. Or, if the numbers say it is better as a rental, you can refinance into a long-term DSCR loan. That strategy is called BRRRR: buy, rehab, rent, refinance, repeat.
What first-timers get wrong
Lowballing the rehab. Everyone does it once. Add a cushion. Houses hide things.
Forgetting holding costs. Interest, insurance, utilities, and taxes keep running while the house sits. Time is a cost.
Overbuilding. Finishing a house to a standard the neighborhood will not pay for is how profit disappears. Match the comps.
No exit plan. Know in advance whether you are selling, renting, or both, and what happens if the market takes longer than expected.
Mixing it up with a home loan. Investor loans are business-purpose. If you want to renovate a home you will live in, that is a separate program, and a good one, but it is not the same thing.
Who this is a good fit for
- First-time flippers who have a deal and a contractor
- Experienced investors who want speed
- People coming out of wholesaling who are ready to hold the property
- Anyone who needs to close fast and cannot wait on a month-long process
Who it might not fit
If you plan to live in the property, you want a primary-residence program instead. If you want a long-term rental with no major rehab, DSCR may be a better fit. If you are not sure, tell me what you are trying to do and I will point you in the right direction.
What to have ready
- The property address and contract
- Your estimated rehab scope and budget
- Your ARV estimate with comps if you have them
- Entity information if you are buying through an LLC
- Proof of funds for the down payment and closing costs
Do not worry if some of that is rough. Send me what you have and we will tighten it up together.
Next step
Text me at (817) 697-4281 or tap See what I qualify for. Send the address and your numbers, and I will tell you whether it works and how we would structure it.
Néstor Caussade, NMLS #1538512, DFW Mortgage Pros
