On a fix and flip loan, the money to buy the property is paid out at closing, and the money for the renovation is held back and released in draws as the work is finished and an inspector confirms it. You pay for each stage first and are reimbursed after the inspection, so the draw schedule, more than the loan amount, decides whether a New Jersey project runs smoothly. Here is how the draws work and how I tell Monmouth County and Shore investors to plan for them.
The loan has two parts
A fix and flip loan, also called a residential transition loan, is short-term financing for an investor to buy and renovate a property, then sell it or refinance it into a long-term loan. These loans are often called hard money or private money loans. We make them across New Jersey as a licensed direct lender, and your terms come in writing on a term sheet before you commit. They are for business purposes only: the property is an investment that nobody on the loan will live in. Residential properties of one to four units, townhomes and condos can be financed, including properties that need a lot of work.
The purchase money funds at closing. The renovation money does not. It stays in the loan and comes out in draws, against a budget you wrote before closing.
The budget comes before the draws
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. You fill it in online, on a computer or a phone, you can save it and finish later, and you can change it after you submit it.
A contractor’s bid is the usual starting point, turned into lines an inspector can check. Keep the cushion. An older Shore bungalow or a Monmouth County colonial usually has a surprise behind a wall.
Check your town’s permit and inspection rules before you set the schedule. A stage that must pass the town’s inspection before the next trade starts will set the pace of your draws.
How a draw works
As work is finished you ask for a draw. A third-party inspector confirms how much of each line is complete, and the completed work is reimbursed. Materials bought but not yet installed are not paid for: a pallet of tile in the garage is not a draw, and a tiled bathroom is.
You pay for each stage first, and the loan pays you back after the inspection. Plan your cash to pay for each stage before its draw. The most common trouble I see on a New Jersey flip is not the loan amount. It is cash spent on the second stage before the first draw came in.
Interest while the work goes on
You pay interest only each month during the work, and the balance is repaid at the end of the term when you sell or refinance. On many fix and flip loans, interest is charged only on the part you have actually drawn, so renovation money waiting in the loan does not cost you interest until you draw it. The structure varies by loan, so confirm it on your own term sheet.
How much of the renovation the loan covers
The loan is sized on three figures: the purchase price, the line-by-line renovation budget and the value you expect the property to have after the work. It is the smallest of several limits, and the limits depend on your credit and your record of completed projects. On many programs the loan can cover the whole renovation budget, released in draws. The Deal Snapshot leverage estimator on our fix and flip loans page takes your three numbers and shows how the deal pencils, and your exact numbers come back with your quote.
Terms depend on your record of completed projects. First-time investors are considered for purchases, on tighter terms, and general-contractor experience counts with proof the projects were completed. A licensed loan officer can tell you where your experience puts you.
Two rules worth knowing before you list the finished house
Why the paperwork looks different. The federal Truth in Lending rules, Regulation Z (opens in a new tab), do not apply to credit made mainly for a business or commercial purpose, or to credit extended to other than a natural person. That exemption is why a fix and flip loan closes through your company on a term sheet rather than with the disclosures a home mortgage carries.
If your buyer uses an FHA loan. HUD’s rule on re-sales (opens in a new tab) says a home resold 90 days or less after the seller acquired it is not eligible for an FHA-insured mortgage. A resale between 91 and 180 days at double the price the seller paid needs additional documentation, such as an appraisal from another appraiser or evidence that the rehabilitation produced the value. The days run from the date you settled on the purchase to the date your buyer signs the sales contract. Build those days into your plan.
Fix and hold
If you decide to keep the house, once it is renovated and rented a long-term rental loan based on the property’s rent can replace the short-term loan. Our page on DSCR loans in New Jersey explains how that loan is read. If the property needs little or no work, a bridge loan may fit better; see fix and flip or bridge, compared. Our fix and flip loans in New Jersey page covers the rest, from the documents to have ready to how to request a quote.
Frequently asked questions
When is the renovation money paid out?
In draws, after the work is finished and a third-party inspector confirms it. The purchase money is paid at closing; the renovation money is held back and reimburses completed work stage by stage.
Does the loan pay for materials I have bought but not installed?
No. Materials bought but not yet installed are not paid for. Plan your cash to pay for each stage before its draw.
Can I change the rehab budget after I send it?
Yes. You list the renovation costs line by line on our site, you can save it and finish later, and you can change it after you submit.
Do I pay interest on the whole loan during the renovation?
You pay interest only each month during the work. On many fix and flip loans interest is charged only on the part you have drawn; the structure varies by loan, so ask how it works on your own file.
Sources
- Consumer Financial Protection Bureau, Electronic Code of Federal Regulations, 12 CFR 1026.3, Exempt transactions (Regulation Z) (opens in a new tab), updated October 27, 2026.
- U.S. Department of Housing and Urban Development, Electronic Code of Federal Regulations, 24 CFR 203.37a, Sale of property (time restrictions on re-sales) (opens in a new tab), updated October 27, 2026.
Facts from these sources are stated in our own words. Last reviewed .
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