A good flip lives or dies on two things: the numbers on the property, and how fast you can move. A regular mortgage helps you with neither. It underwrites you, it takes weeks, and it won't lend against a house with no kitchen. A fix and flip loan is built for exactly the deal a conventional lender won't touch. Here's how it actually works, in plain English.
It's Underwritten on the Deal, Not on You
This is the whole idea. A conventional lender looks at your income, your tax returns, and your debt-to-income ratio. A fix and flip lender looks at the project: the purchase price, your renovation budget, and the after-repair value (ARV), which is what the property should be worth once the work is done.
The loan is sized against that ARV rather than the current, as-is price. That's what lets a single loan cover both the acquisition and a large share of the rehab. Your credit and your liquidity still matter, and your track record helps, but the deal is the star of the file, not your W-2.
The Money Comes to You in Draws
Here's the part that surprises first-time flippers. The rehab money is not handed to you at closing in one lump. It's set aside and released in stages, called draws, as each phase of work gets completed and inspected. You pay for a phase, the lender verifies it's done, then you're reimbursed and move to the next.
What that means in practice: you need working capital to carry each stage before the draw catches up to you. A project with no cushion between draws is how a renovation stalls halfway through a bathroom. Budget for the gap before you ever write the offer.
You Pay Interest-Only While You Hold It
During the renovation the property produces no income, so these loans are typically structured interest-only. That keeps your monthly carry as low as possible while you're mid-project. The flip side is that this is short-term money, measured in months, and it's priced for speed and flexibility rather than for sitting in. Every month you hold past your plan eats into the margin.
The Exit Is the Plan
A fix and flip loan always has an exit baked in, and lining it up before you close matters more than almost anything else. There are two ways out:
- Sell it. The classic flip. Renovate, list, pay off the short-term loan from the sale proceeds, keep the spread.
- Keep it. If the numbers work as a rental, you refinance out of the short-term loan into long-term financing, commonly a DSCR loan that qualifies on the property's rent instead of your income. That's the "flip-to-hold," and it's the backbone of the BRRRR strategy.
Either way, you don't want to be figuring out the exit after the drywall is up. Know which door you're walking through, and have the takeout ready.
Who This Is For
A fix and flip loan is the right tool when:
- You're buying a property that needs real work before it can be sold or rented
- You need to close fast to compete with cash offers, auctions, or probate sales
- The home won't pass a conventional appraisal in its current condition
- You want to qualify on the strength of the deal rather than on tax returns
- You plan to close in an LLC or other entity
It's a business-purpose loan, which means I can work these in most states, not only the handful where I'm licensed for primary-residence lending.
The Mistakes That Cost People Money
Two things sink more flips than anything structural. First, a thin rehab budget, no contingency, so the first surprise behind a wall breaks the whole timeline. Second, no exit lined up, so the short-term clock runs out before the property sells or refinances. Neither is a financing problem. Both are planning problems, and both are fixable on the front end.
Let's Price Your Deal
Send me the address, the purchase price, your rehab budget, and the ARV, and I'll tell you the same day whether the deal pencils and what the financing looks like. You can also run a quick scenario yourself with the flip calculator on my investor page, and the fix and flip program page has the full rundown.
Call or text me at (248) 925‑0539. No application needed to talk it through.