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Fix and Flip Loans — Lendia California

What Is a Fix and Flip Loan?

A fix and flip loan is a short-term financing product designed for real estate investors who acquire distressed or undervalued properties, renovate them, and sell them for a profit. Unlike a conventional mortgage — which is designed for long-term homeownership — a fix and flip loan is built around the timeline and mechanics of a renovation and resale project.

How It Works

The loan covers both the acquisition cost and, in most cases, the renovation budget. Rather than requiring the investor to pay for all renovation costs out of pocket, the lender sets aside a portion of the loan in a draw account that is disbursed as work is completed and verified.

What Makes It Different

  • Short term: Typically 6–18 months, not 30 years
  • Based on ARV: Loan amounts are calculated against the after-repair value of the property, not just its current as-is value
  • Interest-only payments: Most fix and flip loans have interest-only payments during the project period, with the full balance due at maturity
  • Draw schedule: Renovation funds are disbursed in phases as work is completed and inspected
  • Asset-based underwriting: The property and deal economics matter more than the borrower’s income

The Exit Strategy

The loan is repaid when the renovated property is sold. The profit — the difference between the all-in cost (acquisition + renovation + financing + selling costs) and the sale price — is the investor’s return.

Core ConceptAcquire, renovate, sell, repay. Fix and flip loans are built around the investment timeline — short-term, interest-only, with renovation funds built in.

Following the money on one deal (illustrative example, not a quote)

Say you buy for $300,000, spend $60,000 on renovation and sell for $480,000. Assume $25,000 in combined interest and points and selling costs of 6% of the sale price ($28,800). Your costs add up to $413,800 ($300,000 + $60,000 + $25,000 + $28,800). Profit: $66,200 ($480,000 − $413,800). The loan makes the deal possible, but the profit lives in the spread between value and total cost, which is why accurate numbers matter more than the loan itself.

Is this loan a fit?

  • A good fit: an investor with a property that needs work, a realistic ARV and an exit within the loan term.
  • A questionable fit: a buyer who wants to live in the property, or a deal whose margin disappears once financing and selling costs are included.
  • A different tool: an investor who plans to keep the property as a rental after the renovation, who might compare fix and rent financing.

The cost categories to include in every analysis

  1. Purchase price and closing costs
  2. Renovation budget plus contingency
  3. Interest, points and fees
  4. Holding costs: insurance, utilities, taxes
  5. Selling costs: agent fees, escrow, title and transfer charges where applicable

Three questions before you buy

  1. Can I support the ARV with sold comparables nearby?
  2. Does the deal still work if renovation costs rise and the sale takes longer?
  3. Do I have cash for the down payment, costs, interest and reserves?

Frequently asked questions

Can I live in the home while I renovate it?

These loans are built for investment projects, not for a home you will occupy. For owner-occupied needs, see our guidance on hard money for owner-occupied properties and look at other loan types.

How is this different from a hard money loan?

A fix and flip loan is built around renovation and resale, with a draw account for rehab funds. A hard money loan is a broader asset-based category, and fix and flip is one common use.

Do I need to be a licensed contractor?

No. Lenders want to see a qualified, licensed contractor and a scope of work, not that you are one yourself.

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