Fix. Flip. PROFIT!
Fix and Flip Real Estate: Simple Breakdown for Investors
A fix and flip is a short-term real estate investment- not a primary residence. The goal is simple: buy a property below market value, renovate it, and sell it for a profit. Fix and flip properties are considered investment properties and are most often purchased under an LLC for liability and business purposes.
What Is a Fix and Flip?
A fix and flip involves purchasing a home that needs repairs, making improvements, and then reselling the property as quickly as possible. These homes are usually outdated or in poor condition and cannot sell for top dollar without renovations.
Common improvements include:
Paint and flooring
Kitchen and bathroom updates
Roof, HVAC, or structural repairs
Once renovations are complete, the property is listed for sale at a higher price, ideally creating profit after costs.
Fix and Flip Loans Explained
Fix and flip loans are different from traditional home loans. Because these are short-term investments with higher risk, lenders structure them differently.
Most fix and flip loans:
Are short-term (typically 6–12 months)
Have higher interest rates
Are often interest-only payments
Are based heavily on the investor’s experience level
Lenders consider these loans riskier because:
Rehab costs can exceed the budget
Homes can take longer to sell than expected
Market conditions can change quickly
How Experience Affects Fix and Flip Loan Terms
No Prior Flips (0 completed flips)
Most common option: Hard Money / Bridge Loan
Higher interest rates (often 9%–11%+)
2%–3%+ points paid upfront
Lower leverage (typically 60%–70% of ARV or lower loan-to-cost)
Strong cash reserves (12+ months) can improve terms
Having an experienced general contractor (GC) helps
A GC can be added to the LLC as a contractor only and does not share in profits
1–2 Completed Flips
Bridge or hard money loans with improved terms:
Slightly lower rates and points
Higher leverage (often 65%–75% ARV, depending on deal strength)
Faster approvals when a clean track record is shown
3+ Flips in the Last 24–36 Months (Experienced Investors)
Best pricing and leverage available:
Lower rates and fewer fees
Higher leverage (sometimes 75%–80% ARV with strong deals)
Fewer lender conditions and smoother approvals
Planning to Keep the Property as a Rental?
Some investors choose to fix, rent, and then refinance:
Bridge to DSCR loan: Buy and rehab with a bridge loan, then refinance once rented
DSCR cash-out refinance after seasoning (rules vary by lender)
Important Fix and Flip Rules to Know
No flips in the last 36 months = many lenders treat you as no experience
Selling land typically does not count as flip experience
Most fix and flip loans do not have prepayment penalties (but always confirm)
Fix and Flip Loan Scenario Requirements
When submitting a fix and flip scenario, lenders typically need:
Property address
Purchase price
Rehab budget
ARV (After-Repair Value)
Borrower credit score (FICO)
Number of investment properties owned or sold in the last 36 months
