Fix & Flip Loans

A hard money fix and flip loan, also known as a private money fix and flip loan, is a short-term loan used by real estate investors or house flippers to acquire and resell fixer-upper properties for profit.

Our loans span from a minimum of $250,000 to a maximum of $10 million.

Private lenders use LTV and LTC to calculate hard money fix and flip loan amounts. LTV is the ratio of loan amount to property value.

Ex: $80,000 loan against a $100,000 home = 80% LTV

LTC is the loan amount (purchase + rehab financing) divided by the total cost of the project (purchase price + rehab budget).

Ex: $100,000 purchase price + $50,000 rehab = $150,000 total cost
$80,000 purchase loan + $50,000 rehab = $130,000 loan/$150,000 total cost = 86.70% LTC

AS-IS value is the current value of the property, while After Repair Value (ARV) is the project’s projected sale value when complete.

No. Cash-strapped house flippers often ask for a 75% ARV fix and flip loan. This is code for, “I don’t have any money for the down payment, closing costs, or rehab. But, the lender will be fine since the total loan will come out to 75% of ARV, which is plenty of protective equity.”

Hard money lenders require borrowers to have skin in the game.

Mortgage funds originate fix and flip loans for their own loan portfolios, while conduit lendersoriginate and sell theirs to investors in the secondary market, like pension and hedge funds.

Since mortgage funds are often regionally focused (ie. Pacific Northwest), they can structure loans more creatively, allowing borrowers to use other properties as collateral (cross-collateral blanket loans) for higher leverage financing.

Conduit lenders often originate fix and flip loans nationwide and only allow a single property for the loan collateral.

Banks don’t lend directly to borrowers unless the house flipper has a long-running cable TV show and a large depository relationship with a local bank.

New bank loans take about 6-8 months to turn a profit after all the expenses (underwriting, legal, salaries, overhead, etc.) are paid. Since fix and flip loans pay off within 6-8 months, it’s a mismatch.

However, banks do lend to hard money fix and flip lenders through warehouse funding, or lines of credit to originate new loan

Fix and flip rehab loans are hard money loans that finance the purchase and rehab costs of a fix and flip project.

1. With Dutch Interest, mortgage funds and private individuals (trust deed investors) often charge borrowers interest on the entire loan including all rehab funds – even funds not yet released – from the date of origination.
2. Conduit lenders use Stage Funding, which charges interest on rehab funds only after they’re released.

Fix and flip pricing depends on the borrower (experience, credit, liquidity), the scope of work (heavy or light renovation), and the source of capital (conduit lender, mortgage fund, or trust deed investor).

FCTD is a mortgage broker with access to numerous capital sources (individual trust deed investors, family offices, mortgage funds, and conduit lenders) for fix and flip projects. We use our diverse network of lenders to quickly deliver competitive loan options for our clients – who often come to rely on us long-term to secure funding for their projects.

Borrower requirements are set by the capital source, be it a conduit lender, mortgage fund, or individual trust deed investor – available in greater detail in this Loan Application Requirements article.

To flip a house, you need to bring money to the table. Hard money fix and flip lenders require you to self-fund your down payment, closing costs, and post-close liquidity (for mortgage payments, taxes, insurance, and utilities.) Each situation is different, and so is the amount of out-of-pocket expenses required.

100% LTV hard money fix and flip financing is extremely rare. Most hard money lenders require borrowers to come in with down payment and closing costs. If you’ve sourced a property really well, you might be able to obtain 85-90% LTV on the purchase with 100% LTC for the rehab.

Gap funding is a second mortgage behind the fix and flip first mortgage to cover down payment, closing costs, and sometimes the entire rehab budget – allowing a zero-down acquisition. However, gap funding is incredibly rare, reserved for only the most experienced house flippers. FCTD does not provide gap funding.

Expect to research and plan extensively before you pursue your first hard money loan for a fix and flip project. Read our blog post, What First Time House Flippers Need to Know About Private Money Loans to get the overview.

Yes, FCTD has originated dozens of fix and flip loans for investors acquiring listings for Auction.com, as well as Hubzu and Xome.

It's possible to structure your fix and flip with seller financing – provided your first mortgage lender allows junior mortgages. Many do not. Those that do won’t allow 100% financing, but instead will require you to put some money down.

If you're flipping a house with an equity partner who's funding the down payment and closing costs in exchange for an expected return on investment (ROI), you'll need to disclose this to the hard money lender at the outset.

Fix and flip lenders will perform background checks on the equity partner and source the down payment funds to comply with anti-money laundering requirements.

If you go well over budget on your fix and flip project, the best path is to either ask your current lender for additional funds or a friend or family member for a short-term loan. A second mortgage behind your fix and flip + rehab loan won't be an option to cover the deficit.