A fix and flip loan is the most misunderstood product in hard money, because it is really two loans in one: a purchase loan sized on what the property is worth today, and a construction loan sized on what it will be worth when the work is done. Get the two halves straight and everything else, the draws, the pricing, the cash you need, the exit, falls into place. This guide is written as the questions we hear on the first call, in the order we hear them. Our own numbers are the ones published on the fix and flip program page: rates from 9.99% to 12.00%, up to 85% of the purchase, 100% of the rehab and 75% of ARV, loans from $250,000 to $10,000,000, terms of 6 to 18 months, and first time flippers allowed.
I. The loan
What is a hard money fix and flip loan?
A fix and flip loan funds the purchase of a property that needs work and the renovation that follows, in one short-term loan, so the borrower can resell the finished property at a profit. The purchase money is advanced at closing; the renovation money is held back and released in draws as the work is completed.
The lender is underwriting a project rather than a borrower. Three numbers define it: the purchase price, the renovation budget, and the after repair value, the price the finished property will sell for. The loan is sized so that all three leave the lender a cushion, and it is repaid from the sale. If the borrower decides to keep the property as a rental instead, the exit becomes a refinance into a long-term loan such as a DSCR loan, which is a common and often better outcome than the flip itself.
Because the loan is short and interest-only, the monthly cost is manageable while the property earns nothing. Because the renovation is funded through draws rather than at closing, the borrower does not pay interest on money that is still sitting with the lender, provided the loan is non-Dutch. Ours are.
What are Loan Goat’s minimum and maximum loan amounts?
Our fix and flip program publishes loans from $250,000 to $10,000,000. Below that minimum, a small loan is a conversation about whether the project’s margin justifies the closing costs, and we would rather have that conversation than turn a good small deal away.
The maximum is larger than most first projects will ever need, and it exists because the program covers everything from a single-family cosmetic refresh to a multi-unit repositioning. The property types published for the program are single-family residences, condos and townhomes, and two to four unit buildings. A larger commercial project belongs under our bridge or construction programs, where the bridge program runs to $25,000,000 on a business purpose file.
What is loan-to-value versus loan-to-cost?
Loan-to-value divides the loan by what the property is worth; loan-to-cost divides the loan by what the project costs, meaning the purchase price plus the renovation budget. A fix and flip lender measures both, and the loan is sized to whichever produces the smaller number.
A worked example with round numbers. You buy a house for $600,000, the renovation will cost $150,000, and the finished house is expected to sell for $1,000,000. Total cost is $750,000. At our published maximums the purchase is funded up to 85%, which is $510,000, and the renovation up to 100%, which is $150,000, for a loan of up to $660,000. Measured against the after repair value, 75% of ARV would allow up to $750,000, so it is not the test that binds here, and no lender advances against future value alone. So the loan is $660,000 at most: the borrower brings the remaining $90,000 of the purchase plus closing costs, and the finished value of $1,000,000 leaves a cushion of $340,000 above the loan before selling costs and profit are counted.
The lesson of the example is that LTC is the number that usually binds on a flip, because cost is known and value is a forecast. A borrower who arrives asking “what is the max LTV” is asking the less useful question. The LTV vs LTC vs ARV article goes through three more examples.
What is as-is value versus after repair value?
As-is value is what the property is worth today, in its current condition; after repair value is what it will be worth when the scope of work is complete. The appraiser reports both on a fix and flip loan, and the lender uses each for a different purpose.
The as-is value governs the purchase advance at closing. The after repair value governs the total loan, including the holdback, and it is the number the resale exit depends on. Between the two sits the renovation budget, and the relationship between the three is the whole deal: if the budget is too high relative to the value it creates, the project does not work whatever the loan looks like. Support the after repair value with comparable sales of finished homes on the same streets, recent and truly similar. An after repair value built on the best sale in the zip code is the fastest way to have a loan cut back in underwriting.
Can I get a fix and flip loan based only on ARV?
No. A lender advances against the as-is value at closing and releases the renovation money as the work creates the value; nobody funds the whole after repair value on day one, because on day one it does not exist.
What a strong ARV does is raise the total loan the lender is willing to fund through the holdback, and give the borrower room on the exit. It does not replace the borrower’s own money in the deal. The published caps, 85% of the purchase, 100% of the rehab and 75% of ARV, are the outer limits, and all three are measured with the borrower’s equity in the purchase and a verified budget. A borrower asking for a loan based on ARV alone is usually asking for 100% financing, which has its own answer below.
II. The lender and the money
Mortgage fund, conduit lender or direct lender?
A mortgage fund lends pooled capital to a target return; a conduit originates to a formula so the loan can be sold; a direct lender funds from capital it controls. Each will fund a flip, and the differences show up in the draws, the flexibility, and what happens when the project changes.
A conduit lender is efficient when the deal fits its box exactly and unable to help when it does not, because the buyer of the loan set the rules. A fund can be creative on structure and quick on decisions because a small credit group makes them. Whoever the lender is, the questions to ask before choosing are practical: how are draws requested and how fast are they paid, is interest Dutch or non-Dutch, what happens if the project runs past the term, and who do you call when a change order lands. The guide to hard money loans describes each type of lender in more depth.
Isn’t a bank loan better than a private money loan?
A bank loan is cheaper per month and impossible for most flips. Banks lend on finished properties to borrowers with documented income, on a timeline measured in weeks; a flip is an unfinished property bought by an investor on a timeline measured in days.
The comparison that matters is not the rate but the profit. A property bought at a discount because the seller needed to close in ten days, renovated on a funded budget and sold in six months, earns its return from speed and from the value created. The interest paid on the loan is a cost of that return. A bank rate on a loan that could not close in time, or could not fund the renovation, is not a cheaper option; it is not an option. Where a bank does become the right tool is at the exit, when a finished, rented property qualifies for long-term financing and the flip becomes a hold.
How do fix and flip plus rehab payments work?
The renovation money is a holdback: it stays with the lender at closing and is released in draws as the work is completed and verified. Our program publishes a construction holdback of up to 100% of the rehab, and the loan is non-Dutch, with interest calculated on the drawing balance.
In practice the borrower or contractor completes a stage of work, submits a draw request with invoices and photographs, an inspection confirms the stage, and the lender wires the funds. Interest accrues on the purchase advance from closing and on each draw from the day it is released, never on the undrawn balance. That is what non-Dutch means, and on a six-month renovation it is a real saving compared with a loan that charges interest on the full amount from day one. An interest reserve is available on the program, which lets the monthly payments be funded from the loan itself while the property is empty.
The practical advice: build the draw schedule into the contractor agreement before closing, so the stages the lender inspects are the stages the contractor is paid for. A borrower who pays the contractor ahead of the draws is funding the gap from cash.
What is the pricing on a fix and flip loan?
Our fix and flip rates run from 9.99% to 12.00% for qualified borrowers, and the loan carries no prepayment penalties. Points and lender fees are quoted on the term sheet for the specific project rather than published as a flat figure.
The rate moves from the starting figure with the factors every lender weighs: the leverage requested against the caps, the size of the renovation relative to the as-is value, the borrower’s track record, and how well supported the resale exit is. The whole price of the loan is the interest for the months you actually hold it, plus the points and fees at closing, plus the third-party costs of the appraisal, title and escrow. On a flip that sells in month five, five months of interest at a rate near the top of the market can cost less than seven months at a lower rate with a prepayment penalty. Compare term sheets on the total, not on the headline. Our pricing guide sets out every part of the cost.
What are the application requirements?
The program lists three documents at application: the application itself, a schedule of real estate owned and proof of funds. The published minimum FICO is 620, and first time flippers are allowed.
Beyond those three, the file for a flip includes the purchase contract, the scope of work with a budget by trade and contractor bids, the after repair value support, and entity documents if the borrower is an LLC. Experience is read from the schedule of real estate owned and from any completed projects; a first-time flipper’s file is read more carefully on the budget and the contractor, because that is where first projects go wrong. Two habits shorten every timeline: send the complete file at once rather than in pieces, and answer underwriting questions the same day. Loan Goat’s process is four steps, and the documentation step is the one the borrower controls.
III. Cash, gaps and the edge cases
How much money do you need to flip a house?
A flipper needs cash for four things: the down payment, the closing costs, the carrying costs during the project, and a contingency for the surprises. The loan funds the purchase up to the program’s leverage and the renovation through the holdback; the rest is the borrower’s.
Using the earlier example, a $750,000 project funded at 85% of the purchase and 100% of the rehab leaves a $90,000 down payment. Closing costs, points and third-party fees add to that at closing. Carrying costs are the monthly interest, taxes, insurance and utilities for as long as the project runs, unless an interest reserve funds the payments from the loan. The contingency is the budget line most first-time flippers skip and most experienced flippers insist on. Add the four and you have the cash a flip actually needs, which is always more than the down payment alone. The full article on the question works the numbers in more detail.
Does Loan Goat offer 100% fix and flip financing?
No. Our published caps are 85% of the purchase and 100% of the rehab, which means the borrower funds at least fifteen percent of the purchase price, plus closing costs, from their own money or from a partner’s.
A loan for 100% of the cost of a project would leave the lender carrying all of the risk of the plan while the borrower carried none, and no lender who expects to be repaid structures a loan that way. What the published caps do allow is high leverage for a borrower with a strong deal: up to nine dollars of the lender’s money for every dollar of the borrower’s. A borrower with less than ten percent to bring has three honest routes, an equity partner, seller financing, or a smaller deal, and each is covered below.
What is gap funding?
Gap funding is money from a third source that covers the difference between what the senior lender advances and what the deal needs, usually the down payment, closing costs or a budget overrun. It arrives as a second lien, an equity partner or seller financing, and most senior lenders limit it because it takes the borrower’s own money out of the deal.
The reason is not stubbornness. A lender sizing a loan at 85% of the purchase is relying on the borrower’s fifteen percent as the cushion and the commitment; if that fifteen percent is itself borrowed, the cushion is gone and the borrower has nothing to lose by walking away when the project turns. Whether a particular gap structure works behind a Loan Goat loan depends on the deal, the source of the gap money and its lien position, and it is a question for the first call rather than an assumption to make after closing. What never works is an undisclosed second lien recorded behind the senior loan.
Can I use a fix and flip loan to buy Auction.com listings?
Yes, online auction purchases can be financed with a fix and flip loan, and the timing is the challenge rather than the property. Auction platforms require a deposit at the winning bid and a close on the platform’s schedule, so the loan is arranged before the bid, not after.
The process is to get the loan approved on the borrower and on a property profile before the auction, hold proof of funds for the deposit, and be ready to fund within the platform’s window. Properties bought this way are sold as-is, usually without an interior inspection, so the renovation budget carries more risk and the contingency line matters more. Our auction and Hubzu scenario page walks through the sequence, and the foreclosure auction page covers the trustee’s sale, where the rules are stricter still.
Can I combine a fix and flip loan with seller financing in second position?
Seller financing behind a fix and flip loan means the seller carries part of the price as a second lien, reducing the cash the buyer brings. Some lenders allow it for experienced borrowers with a strong project; many limit it for the same reason they limit gap funding.
The structure has to be disclosed and approved before closing, because the senior lender is agreeing to share the collateral. The seller’s note sits behind the fix and flip loan, gets repaid at the sale after the senior loan, and usually carries a short term to match. Whether it fits a given deal at Loan Goat is a first-call question: bring the proposed terms of the seller’s note, the borrower’s track record and the project numbers, and we will tell you whether the whole structure works. What we will not do is discover the seller’s note in the title report.
How does fix and flip financing work with an equity partner?
An equity partner contributes the cash a borrower lacks, the down payment, closing costs or contingency, in exchange for a share of the profit rather than interest. The partner is usually a member of the borrowing entity, and the lender underwrites the entity with both members in it.
This is the cleanest way to finance a flip with less of your own money, because the cash arrives as equity rather than as a hidden lien. Lenders generally require the partner to be disclosed, to sign the entity documents, and often to guarantee the loan alongside the operating partner. The profit split is the partners’ business; the lender’s concern is that the equity is real and that someone with authority is running the project. A first-time flipper with a capable partner is a stronger file than a first-time flipper alone.
What are the options when a project runs over budget?
A project that runs over budget has three sources of money: the contingency, the borrower’s own cash, and additional financing. The order matters, and the time to plan for it is before the first draw.
The contingency is the first line, and it is why the budget should carry one. The borrower’s cash is the second, and it is why a flipper keeps liquidity through the project rather than spending it at closing. Additional financing is the last resort: some lenders will increase a loan or extend its term when the after repair value still supports the larger balance and the work is on track, and some will not. The worst position is a half-finished property, an exhausted budget and a maturing loan, and it is reached one skipped contingency at a time. If a project is heading over, call the lender early. A lender who knows in month three has options; a lender who finds out in month eleven has one.
Conclusion
A fix and flip loan works when three numbers agree: a purchase price with a discount in it, a renovation budget with a contingency in it, and an after repair value with comparable sales behind it. Size the loan on cost, plan the exit before closing, fund the renovation through draws you have scheduled with your contractor, and keep cash for the surprises. Our program is built for exactly that project: rates from 9.99% to 12.00%, up to 85% of the purchase and 100% of the rehab, loans from $250,000 to $10,000,000, the rehab released through draws, non-Dutch interest, an interest reserve if you want one, no prepayment penalties, first time flippers allowed, and a close in 5-7 days.
Bring us the address, the price, the budget and the comps. Request a quote or call (619) 617-2797, and we will tell you within a day whether the deal works and what the loan looks like.
