Fix and flip
Buy a property that needs work, renovate it with money released in draws, and repay the loan when you sell.
Fix and flip · bridge · ground-up
Fix and flip loans for real estate investors.
A fix and flip loan is short-term financing for a real estate investor to buy and renovate a property, then sell it or refinance it into a long-term loan. Renovation money is released in draws as the work is done. For business purposes only.
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- NMLS #103098
- Equal Housing Lender
FIDELITY RESIDENTIAL
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Licensed Mortgage Bank & Direct Lender · NMLS #103098
- Licensed mortgage lenderNMLS #103098. Check our licences on NMLS Consumer Access.
- Renovation money in drawsReleased as the work is done and inspected.
- Terms in writingA term sheet for your deal, signed online.
- A licensed loan officerA real person sizes the deal with you.
The basics
How a fix and flip loan works
A fix and flip loan, also called a residential transition loan, is a short-term loan to an investor who buys a property, renovates it, and then sells it or refinances it into a long-term loan.
It has two parts. The money to buy the property is paid out at closing. The money for the renovation is held back and released in draws as the work is finished and an inspector confirms it.
You pay interest only each month, and the balance is repaid at the end of a term measured in months, when you sell or refinance; you can ask for an extension if you need more time. The loan is sized on what the property is worth before and after the work, not on your personal income.
At a glance
- Business purpose: you usually borrow through a company
- Never your home: the property is an investment
- One to four units, townhomes and condos
- Generally no prepayment penalty when you sell or refinance
Strategies
Four ways investors use it
Purchase or refinance. Terms depend on the strategy and on your record of completed projects.
Fix and hold
Renovate and keep the property as a rental. Once it is rented, a long-term rental loan based on the rent can replace the short-term loan.
DSCR rental loansGround-up construction
Buy a lot and build, or build on land you already own, to sell or keep as a rental. A feasibility report, contractor details and plans or a permit are part of the file.
Construction and renovation loansBridge
Short-term financing on a property that needs little or no work, while you sell, lease it up or arrange a long-term loan.
How it works
From deal to draws
Everything happens online, on a computer or a phone.
Submit your deal
The address, the purchase price, the renovation budget and the value you expect after the work, in the quote form above.
Get your terms
We size the loan for your deal and send a term sheet you can sign online.
Apply and send your rehab budget
Apply online, then list your renovation costs line by line. You can save it and finish later. See how it works
Close and draw
The purchase money funds at closing. Renovation money is released in draws as the work is done and inspected.
Deal snapshot
See your leverage before you call.
Plug in your own deal and see how it pencils on our program. Your exact numbers come back with your quote.
Estimated loan amount
$345,000
Loan at 69% of ARV — inside the 75% ARV cap
Est. equity into deal~$30,000
Loan to cost92.0%
Max loan (75% ARV)$375,000
Illustrative estimate for a 640+ credit score and 3 or more completed projects in the last 3 years: up to 90% of as-is value (the purchase price stands in for it here), 100% of rehab, 92.5% of total cost and 75% of ARV. Not an offer or approval; excludes points, closing costs and interest reserves. Subject to underwriting. Heavy rehab projects (foundation work, structural demolition, additions) are priced and sized differently.
Request a quote for this deal
Renovation money
How draws work
Before closing you list the renovation line by line: site work, structure, systems, finishes, exterior and a cushion for surprises. That budget becomes the plan for the draws.
As work is finished you ask for a draw. A third-party inspector confirms how much of each line is complete, and the lender reimburses the completed work. Materials bought but not yet installed are not paid for.
Good to know
- Plan your cash to pay for each stage before its draw
- Interest is paid monthly
- Changes to the budget can be made after you submit it
Be ready
What you will need
Have these handy and we can move quickly. Not sure you have everything? Request a quote anyway and we will guide you.
- The application and credit and background authorization
- Company documents: formation papers, operating agreement, tax number
- Photo identification
- Recent bank statements
- Your track record: the properties you have bought, renovated, sold or kept
- The purchase contract
- The rehab budget, filled in online (see how)
- Insurance and title, arranged before closing
Program rules worth knowing
- Cash-out refinance: cash-out can be no more than 50% of the project’s total projected profit
- Fix and hold: the finished rental needs a projected DSCR of at least 1.00, so the expected rent at least covers the payment, taxes, insurance and any HOA
- General-contractor experience counts with proof the projects were completed; on its own it qualifies for our second experience tier up to $2.5M and first-time-borrower terms above that, and not for subdivision projects
- Interest reserves count inside the approved loan-to-cost and ARV limits, and on a cash-out refinance they come out of the cash-out
- Heavy rehab: projects with foundation work, structural demolition or additions, or a rehab budget close to the purchase price, are priced and sized differently, with different rates, leverage and limits
Questions
Common questions about fix and flip loans
Do I need a company to borrow?
Usually, yes. These are business-purpose loans, so you normally borrow through a company such as a limited liability company. We tell you which company documents to send.
Do you work with first-time investors?
Terms depend on your record of completed projects. First-time investors are considered for purchases, on tighter terms. A loan officer can tell you where your experience puts you.
What properties can I finance?
Residential properties of one to four units, townhomes and condos that nobody on the loan will live in, including properties that need a lot of work. Heavy rehab projects (foundation work, structural demolition, additions) are priced and sized differently.
What counts as heavy rehab?
There’s no single cutoff; the lender decides after reviewing your budget, scope of work and appraisal. A project is often treated as a heavy rehab when the work:
- changes, extends or replaces the foundation;
- removes a large part of the original structure: load-bearing walls, the roof or framing, or takes the house down to the studs;
- adds living space: an addition, a new floor or a bigger footprint;
- converts the property, for example adding units or an accessory dwelling; or
- costs about as much as the purchase price, or more.
What changes: heavy rehab projects are priced and sized on different rates and limits. Usually that means a lower advance toward the purchase price (so more cash at closing) and more paperwork, such as plans or permits, a feasibility report and your contractor’s details. Experience is counted on projects of similar scope.
What to do: tell us early. Answer “yes” to the structural-work question or describe the scope, and we’ll show your loan both ways so there are no surprises.
Is there a prepayment penalty?
Generally no. You can repay the loan when you sell or refinance. If you need more time, you can ask for an extension while the loan is current.
What if I decide to keep the property?
Once it is renovated and rented, a long-term rental loan based on the property’s rent can replace the short-term loan. See our DSCR rental loans.
How do I send my rehab budget?
Right after your application, you list your renovation costs line by line on our site, on a computer or a phone, and sign it online. You can save it and finish later, and change it after you submit. See the step by step guide.
What does a term sheet look like?
Your term sheet shows the loan amount, rate, term, payments, leverage and closing costs for your deal, and you can sign it online. See a sample term sheet.
What if another lender offers me a better deal?
Our Competing Offer Policy covers Fix & Flip loans. Send us the other lender’s written term sheet for the same property, based on the same credit score, experience level, deal figures and loan structure as ours. If its total cost is lower, we will beat it by at least $100 or pay you $600. Read the Fix & Flip terms of the policy.
Sources: Consumer Financial Protection Bureau, Regulation Z, 12 CFR 1026.3: exempt transactions, including credit for business purposes (opens in a new tab). Facts are stated in our own words.
Have a deal to size up?
Request a quote, apply online, or talk the deal through with a licensed loan officer. Have a term sheet from another lender? See our Competing Offer Policy.
What happens next: a Fidelity Residential specialist will review your numbers and send tailored terms, usually within one business day. These programs are priced per deal and are subject to underwriting.
This page is general information, not a commitment to lend. Programs, terms and eligibility depend on the property, your experience, credit and underwriting review and are subject to change without notice. Business purpose investor loans are for investment property only.
Reviewed by Robert Shamie, CEO, NMLS #241428 · Last reviewed:
Fidelity Residential (PFN Lending Group, Inc., NMLS #103098) is a direct mortgage lender licensed in 40 states and the District of Columbia, with 26 years in business.