This Week’s Spotlight: “FIX & FLIP”
February 10, 2025
A Fix & Flip loan is a short-term financing solution designed for real estate investors who purchase distressed properties, renovate them, and then sell them for a profit. These loans are typically asset-based, meaning they focus more on the property's value rather than the borrower’s credit history.
Fix & Flip Loan Program Highlights:
- Loan Type: Short-term, interest-only loans
- Loan Term: Typically 6 to 24 months
- LTV (Loan-to-Value): Up to 85% of the purchase price
- ARV (After-Repair Value): Up to 75% of the estimated value after renovation
- Loan Amounts: Typically range from $50K to $5M
- Interest Rates: Generally higher than conventional loans (ranging from 7-10%)
- Funding Speed: Quick closings, often within 7-14 days
- Use of Funds: Can cover purchase price, renovation costs, and sometimes carrying costs
- Credit Score Requirement: Typically 620+, but flexible with strong deal structure
- Exit Strategy: Most investors sell the property or refinance into a long-term loan
Key Benefits for Buyers:
- Fast Access to Capital – Unlike traditional mortgages, fix & flip loans provide quick funding to capitalize on investment opportunities.
- Less Emphasis on Credit – Approval is more focused on the property's value and potential profitability.
- Covers Renovation Costs – Many lenders include rehab costs within the loan, reducing out-of-pocket expenses.
- Flexible Terms – Tailored to short-term investment needs, allowing investors to flip properties efficiently.
- Scalability – Experienced investors can use multiple fix & flip loans to grow their portfolio.
Key Takeaways:
- Designed for Investors: These loans are ideal for real estate investors looking to renovate and sell quickly.
- Short-Term Financing: They are not long-term solutions but serve as a bridge until the property is sold or refinanced.
- Higher Interest Rates: Since they are riskier for lenders, interest rates are higher than conventional loans.
- Potential for High ROI: When done right, fix & flip deals can generate significant profit margins.
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