Fix & Flip Loans Explained: A Beginner’s Guide
Flipping houses looks exciting on TV, but if you’re a first-time investor, it can feel overwhelming. How do you actually finance a property that needs work? That’s where Fix & Flip Loans come in.
These loans are designed specifically for real estate investors who want to buy, renovate, and resell (or refinance) properties for a profit. In this guide, we’ll cover the basics, the pros and cons, how they work, and even give you a Fix & Flip Profit Calculator you can use to test your deals.
By the end, you’ll know if a fix & flip loan is the right tool for your first (or next) investment.
What Is a Fix & Flip Loan?
A Fix & Flip Loan is short-term financing designed to help investors purchase and renovate a property with the goal of reselling it quickly.
Unlike traditional mortgages, these loans:
Focus on the after-repair value (ARV) instead of just the purchase price.
Provide funds for both purchase and rehab costs.
Are usually short-term (6–18 months).
Usually interest-only (lower monthly payments while you renovate).
👉 In simple terms: It’s a loan that gives you the cash to buy, fix, and sell a property — fast.
How Do Fix & Flip Loans Work?
Here’s the typical process:
Find a distressed property. Look for homes priced below market value that need repairs.
Estimate costs and ARV. Figure out rehab expenses and what the property could sell for (or appraiser for) after improvements.
Apply for a loan. The lender reviews your project, expected ARV, and experience.
Get funding. The loan covers purchase + rehab, with rehab funds often released in stages (“draws”).
Renovate. You complete the repairs/improvements.
Sell the property or Refinance. Pay off the loan and (hopefully) pocket the profit and move on to your next flip!
Pros & Cons of Fix & Flip Loans
The Pros
Fast approval and funding – Speed matters in competitive markets.
Covers renovations – Not just purchase price, but rehab too.
Credit flexibility – Approval often based more on the deal than your credit.
Interest-only payments – Lower monthly payments while renovating.
The Cons
Higher rates and fees – These loans are riskier for lenders.
Short-term pressure – You need to finish and sell or refinance quickly.
Draw schedules – Rehab money may be released in stages, not all at once.
👉 Bottom line: Fix & Flip Loans give you speed and flexibility, but they’re not the cheapest money out there.
Example Fix & Flip Deal
Let’s say you find a property for $150,000.
Rehab Costs: $50,000
Holding Costs (utilities, insurance, etc.): $5,000
Loan Terms: 12 months, 10% interest, 2 points
Selling Price (after repair): $275,000
Selling Costs (commissions, closing, etc.): $15,000
Profit = Selling Price – (Purchase + Rehab + Holding + Loan Costs + Selling Costs)
If everything goes to plan, you might clear $50,000–$55,000 on this flip.
But margins can shrink fast if rehab costs run high or the property sells for less than expected. That’s why having a calculator is so useful.
Fix & Flip Profit Calculator
Use this tool to test your deals before jumping in. Just plug in the numbers and see estimated Profit ($) and ROI (%).
Common Mistakes Beginners Make
Underestimating rehab costs – Always get multiple contractor bids.
Forgetting holding costs – Taxes, insurance, utilities, and loan payments add up.
Overestimating ARV – Use conservative comps to avoid disappointment.
Not having a backup plan – If the property doesn’t sell quickly, consider refinancing with a DSCR loan (see our DSCR Loans Guide).
FAQs About Fix & Flip Loans
Q: Do I need experience to get a fix & flip loan?
A: No.
Q: How fast can I get funding?
A: Some lenders can close in as little as 7–14 days.
Q: Do these loans cover 100% of costs?
A: You may be able to get 90% of the purchase price and 100% of the rehab costs covered.
Q: What happens if I don’t sell in time?
A: You may be able to extend, but fees apply. Having multiple exit strategies is key.
Key Takeaway
Fix & Flip Loans give you the capital to buy, rehab, and sell properties quickly. They’re not the cheapest money, but they’re often the fastest and most flexible — making them ideal for investors who want to turn distressed properties into profitable flips.
👉 Ready to talk about your first (or next) flip? Contact me at 480-352-0663 or [email protected] with your questions. I’ll walk you through the process step by step.
