Fix and Flip Loans: The Complete 2026 Investor Guide
Advertiser disclosure: we may be compensated by lenders featured on this site; this does not influence our editorial content. Learn more.
Key takeaways
- Fix and flip loans finance purchase plus 100% of rehab, sized at 85–92.5% of cost and capped at 70–75% of ARV.
- Rehab funds release in draws after inspection; plan for working capital to float each cycle.
- Underwrite your own deal with the 70% rule and a 10% contingency before any lender sees it.
- The most common profit killers are scope creep, ARV optimism and holding time — not the interest rate.
Anatomy of a fix and flip loan
A fix and flip loan has two components. The acquisition advance funds at closing — typically 80–90% of the purchase price. The rehab holdback — usually 100% of the approved budget — is held by the lender and released in draws. Total loan is the lesser of 85–92.5% of total cost and 70–75% of ARV. Interest is charged monthly, interest-only, at 8.25–11.5%; points run 1–2.5. Terms are 6, 9, 12 or 18 months, with extension options.
Underwriting your own deal first
Start from ARV, not from the asking price. Pull three to six sold comps from the last six months within a half mile, adjusted for size and condition. Apply the 70% rule: ARV × 0.70 − rehab = maximum allowable offer. In a $400,000-ARV neighborhood with $60,000 of work, your ceiling is $220,000. Then build a budget with a 10% contingency, a realistic timeline (add 30% to your contractor's estimate), and a full carry cost: loan interest, taxes, insurance, utilities, HOA. Finally, subtract selling costs of 7–9% (commissions, concessions, transfer taxes). The fix and flip calculator does all of this and shows ROI and annualized return.
Ready to fund your next deal?
One request. Multiple vetted private lenders. Terms in as little as 24 hours. Free, no obligation.
How experience tiers change your terms
| Tier | Completed flips (36 mo) | Typical max LTC | Typical max ARV | Indicative rate |
|---|---|---|---|---|
| New | 0 | 80% | 70% | 10.5–11.5% |
| Emerging | 1–2 | 85% | 70–72.5% | 10–10.75% |
| Experienced | 3–5 | 90% | 75% | 9.25–10% |
| Professional | 6–10+ | 92.5–95% | 75% | 8.25–9.5% |
The process, start to finish
- Pre-qualification (day 0–1): soft credit pull, proof of funds, track record. You receive a pre-approval letter you can attach to offers.
- Deal submission (day 1–2): contract, scope of work, budget, comps. Term sheet issued.
- Processing (day 2–8): valuation ordered, title opened, entity docs and insurance collected, hard pull.
- Closing (day 7–12): sign, fund acquisition, holdback established.
- Construction: request draws at milestones; lender inspects within 1–3 days; funds wire within 1–2 days after.
- Exit: list at 80–90% completion to shorten carry; payoff at closing of sale.
Managing the draw schedule
Draws are reimbursement-based at most lenders: you pay the contractor for completed work, request a draw, and get reimbursed after inspection. That means you need working capital equal to one draw — commonly 20–30% of the rehab budget. Submit draws against completed line items with photos; partial-completion draws are usually prorated. Some lenders now fund the first draw at closing for materials. Read how draw schedules work.
Five mistakes that kill flip profits
- ARV optimism. Using list prices or comps from the better side of the boundary street. Fix: let a third-party BPO set your ARV before you offer.
- Scope creep. Upgrading finishes mid-project without re-running the numbers. Fix: lock a finish schedule and a change-order process.
- Timeline slip. Each extra month costs interest, taxes, insurance and utilities — often $3,000–$5,000. Fix: line up permits and contractors before closing.
- Under-budgeting selling costs. 7–9% of ARV disappears at the sale. Fix: include commissions, concessions and transfer tax in the pro forma.
- Ignoring the exit. If the market softens, can the property rent and refinance? Fix: underwrite the DSCR exit as a Plan B on every deal.
Choosing a lender
Compare on total cost at your realistic hold period, draw turnaround, whether interest accrues on undrawn funds, extension terms, and responsiveness during underwriting. A lender who funds draws in 24 hours is worth 50 basis points to a busy contractor. Our directory lists these data points side by side, or submit one request to reach several lenders.