Fix-and-Flip Loans: Hard Money for the Purchase and the Rehab

What does a fix-and-flip loan cover?

A fix-and-flip loan is short-term hard money that covers two things: buying the property and paying for the renovation. Because the property usually is not livable or rentable yet, the lender underwrites the deal on the purchase price, the renovation budget and the projected after-repair value, rather than on your personal income.

The renovation is typically funded through a draw schedule: funds are released in stages as work is completed and inspected, rather than in one lump sum. See the rehab draw schedule guide for how that works.

Which three numbers define the deal?

Every flip is built on three numbers: the purchase price, the renovation budget and the after-repair value. The purchase price is what you pay, the renovation budget is what the work will cost, and the ARV is what the finished property should be worth. The lender uses all three to decide how much to finance and how much you bring.

If the ARV is strong relative to the total cost, the deal is more financeable. If the purchase price is high or the renovation over-improves the property, there is less room. See the after-repair value guide for how to build that number carefully.

Why should you plan the exit before buying?

A flip has two exits: sell the renovated property, or keep it and refinance into a long-term DSCR loan. The exit should be chosen before you buy, because it changes the renovation. A property you plan to sell should be renovated to what finished comparable sales support. A property you plan to rent should be renovated for tenants. Compare supported rent with the full proposed refinance payment using the DSCR exit guide, and use the fix-and-flip calculator to budget acquisition and holding costs.

If the keep-and-refinance path is on the table, read hard money to DSCR refinance and plan the takeout from day one.

What do lenders review on a flip?

• The purchase price and the source of your funds.
• A detailed scope of work and a budget with contractor bids.
• The projected after-repair value, supported by comparable sales.
• Your experience and track record, which can affect the structure.
• The exit plan: sale or refinance, and how the loan gets repaid.

How can a broker help compare your options?

Hard money lenders differ in the flips they prefer: some favor single-family homes, some are comfortable with larger rehabs or certain property types, and they structure loans differently. Hard Money Loan is a Loan Daddy LLC brand, and Loan Daddy LLC is a mortgage broker, not a lender. We arrange and shop financing from wholesale lenders and explain the structures that fit your deal. Send the property and the scope of work through the application.