What Is a Fix and Flip Loan? A Plain-English Guide for Real Estate Investors

Short answer: A fix and flip loan funds the purchase of a distressed or dated property and the rehab budget needed to renovate it, so you can resell it for a profit — or refinance it and hold it as a rental.

How the numbers work

A fix and flip loan is sized against two separate caps, and whichever one is lower usually sets your loan amount:

• Loan-to-Cost (LTC): a percentage of your total project cost (purchase price + rehab budget)
• After-Repair Value (ARV): a percentage of what the property is expected to be worth once renovated

Leverage on both depends on your credit score, your experience as an investor, and whether the scope of work is a light cosmetic rehab or a heavier structural one.

Who it’s for

Fix and flip loans are built for investors buying a property that needs work — cosmetic or structural — with a plan to sell it or refinance it once the renovation is done. First-time flippers are eligible; more completed projects unlock higher leverage and better pricing.

How rehab funds get disbursed

Rehab money isn’t handed over in one lump sum. An initial advance funds the purchase, and the rehab budget is released in draws as work is completed and verified — typically through a third-party inspection tied to your line-item budget. Materials are generally only paid for once they’re installed, not when they’re purchased or sitting on-site.

What you’ll need going in

• A purchase price (or as-is value) and a realistic ARV estimate
• A line-item rehab budget — permits, demo, exterior, interior, kitchen, baths, and a description of what’s actually being done for each item
• A credit score — programs exist with scores as low as 500, though stronger credit unlocks better leverage
• Reserve funds and a down payment, sized against the loan-to-cost cap

See what your project qualifies for

Run your purchase price, rehab budget, and ARV through the calculator to see an estimated loan amount and monthly payment.