Investor · 7 min read
What Is a Fix-and-Flip Loan?
A fix-and-flip loan is short-term real estate financing that covers both the purchase price and the renovation budget of a property an investor plans to resell within roughly 6 to 18 months. Instead of underwriting mainly to your income, the lender sizes the loan against the deal itself, most often the after-repair value (ARV), releasing the rehab money in stages called draws as the work gets done. In California, where median resale prices and construction costs both run high, that structure lets flippers control a property with a fraction of their own cash and recycle capital into the next project.
How a Fix-and-Flip Loan Actually Works
The loan splits into two parts. The first funds the acquisition, usually up to a set percentage of the purchase price or the as-is value. The second is a rehab budget the lender holds back and releases through draws. You front the cost of a stage of work, an inspector or desk review confirms it is complete, and the lender reimburses that draw, often within a few business days.
Sizing frequently ties back to after-repair value, the appraised price the property should command once renovations are finished. A lender might lend up to 70% of ARV total, cover 85% to 90% of the purchase, and finance 100% of the rehab as long as the combined loan stays inside that ARV ceiling. The gap between what the loan covers and the total project cost is what you bring as a down payment plus reserves.
Most of these loans are interest-only for the term, so your monthly carry is small relative to the balance. Many California lenders also let you finance the interest on the undrawn rehab portion, meaning you only pay interest on money you have actually pulled. The full balance comes due when you sell or refinance.
Typical LTV, ARV, Rates, Points, and Term in 2026
Terms move with the market and with your track record, but California fix-and-flip financing in 2026 clusters in predictable ranges. Treat these as planning figures, not quotes.
- Loan-to-ARV: commonly up to 65% to 75% of after-repair value.
- Loan-to-cost (purchase): often 85% to 90% of the purchase price for experienced borrowers.
- Rehab funding: up to 100% of the approved budget, paid in arrears through draws.
- Rates: roughly 9.5% to 12% interest-only, with lower pricing for high-volume flippers and strong deals.
- Points: typically 1.5 to 3 points paid at closing.
- Term: 6 to 18 months, with 12 months the most common, and extensions available for a fee.
First-time flippers usually see higher points, lower leverage, and a required experience-building deal or two before the best terms open up. Credit still matters, but it sets pricing tiers rather than deciding approval outright.
Fix-and-Flip vs. Conventional Financing
A conventional mortgage is built for a buyer who will live in or hold the property, underwritten to personal income and a livable condition. A fix-and-flip loan is built for speed and for property that a conforming lender would reject as uninhabitable. The differences are structural.
| Feature | Fix-and-Flip Loan | Conventional Mortgage |
|---|---|---|
| Primary underwriting basis | Deal and ARV | Borrower income and credit |
| Term | 6 to 18 months | 15 to 30 years |
| Rehab funds | Financed via draws | Not included |
| Property condition allowed | Distressed, uninhabitable OK | Must be livable |
| Speed to close | Often 7 to 14 days | 30 to 45 days |
| Payment structure | Interest-only | Principal and interest |
| Rate range (2026) | Roughly 9.5% to 12% | Lower, market-driven |
The higher rate on a flip loan is rarely the deciding cost. On a 6-month hold, a couple of extra points of interest is small next to the profit lost if a slow conventional close makes you miss the property entirely.
How It Differs From Hard Money and DSCR Loans
These terms overlap and get used loosely, so it helps to separate them.
Hard money is the broad category of asset-based, short-term lending secured by real estate. A fix-and-flip loan is a specialized hard money product with rehab draws and ARV-based sizing built in. Every fix-and-flip loan is a form of hard money, but not every hard money loan includes a structured renovation budget. Plain hard money might just fund an as-is purchase with no rehab component.
DSCR loans solve a different problem. DSCR stands for debt-service coverage ratio, and these are long-term rental loans, usually 30-year terms, underwritten to the property's rental income rather than the borrower's W-2. A DSCR loan is what you use to keep a property as a rental, not flip it. Many California investors pair the two: a fix-and-flip loan to buy and renovate, then a DSCR refinance to hold the finished property if the numbers favor renting over selling. That BRRRR-style path lets you pull your rehab capital back out and keep the asset.
A Simple California Deal Example
Numbers make the structure concrete. Assume an investor finds a dated single-family home in an inland California market.
- Purchase price: $520,000
- Rehab budget: $80,000
- After-repair value (ARV): $720,000
The lender approves at 90% of purchase and 100% of rehab, capped at 70% of ARV. The 70% ARV ceiling is $504,000, and purchase-plus-rehab leverage would total $548,000, so the ARV cap governs. Say the lender funds $494,000 total: $468,000 toward purchase (90%) and holds $80,000 for rehab drawn against the balance. The investor brings the remaining $52,000 of purchase plus closing costs, points, and reserves, roughly $75,000 to $85,000 in cash.
At around 10.5% interest-only on drawn funds over a 6-month hold, carry runs in the neighborhood of $22,000 to $27,000, with 2 points near $9,900 at closing. Sell at $720,000, subtract roughly $43,000 in selling costs at 6%, the loan payoff, interest, and points, and the investor clears a mid-five-figure to low-six-figure profit on that cash outlay. Change any input, especially the ARV or the rehab overrun, and the margin moves fast, which is why disciplined comps and a padded budget matter more than the rate.
Who Qualifies for Fix-and-Flip Financing
Because the deal carries the underwriting, the borrower bar is different from a conventional mortgage. Lenders weigh:
- The deal: a defensible ARV backed by real comparable sales, and a rehab scope that pencils.
- Liquidity: cash for the down payment, closing costs, and reserves to carry the project, since draws pay in arrears.
- Experience: prior flips completed. New investors can still qualify, usually at lower leverage and higher points.
- Credit: a mid-600s score or better typically, used to set pricing tiers rather than to approve or deny.
- Entity: most flip loans close in an LLC, which keeps them business-purpose rather than consumer loans.
You do not generally need tax returns or W-2 income verification the way you would for an owner-occupied mortgage, one reason self-employed and full-time investors gravitate to these products.
How a Broker Shops Lenders for Your Flip
Fix-and-flip pricing is not posted on a rate sheet the way conforming mortgages are. Terms swing widely between lenders based on your experience, the market, the property, and each lender's current appetite. A broker's job is to run one deal package past multiple capital sources and bring back the best fit, not just the cheapest headline rate.
That means comparing more than the interest number: how many points, how fast draws are reimbursed, whether the lender inspects in person or by desk review, whether extensions cost a flat fee or reprice the whole loan, and how they treat a first-time flipper versus a repeat borrower. A lender that funds in nine days and turns draws around in three can be worth more than one a half-point cheaper that drags every reimbursement.
Save Financial is a licensed California mortgage broker (NMLS #377740, DRE #01875766), not a bank, with offices in Newport Beach and Marina del Rey. Because we are a broker, we place your flip with the lender whose terms actually match the deal in front of us, whether that is a coastal Orange County renovation or an inland value-add. If you are sizing up a project, we can pressure-test the ARV and structure before you commit.
About this article: Save Financial is a California-licensed mortgage brokerage (NMLS #377740, DRE #01875766) with offices in Newport Beach and Marina del Rey, serving all 58 counties. We shop multiple lenders to match you with the right program. For a real quote, apply online or call 949-379-5320.