Fix and Flip Financing: Funding the Rehab, Not Just the House
The best flip loans cover the renovation budget in draws. Here is how leverage, draws, and experience tiers really work.
New flippers usually shop for a purchase loan. Experienced ones shop for a facility that funds the rehab, because construction money is what actually constrains how many projects you can run.
How the leverage stacks
A typical program funds 80% to 90% of the purchase price and 100% of the renovation budget, capped at roughly 70% to 75% of after-repair value. On a $400,000 purchase with a $100,000 rehab and a $700,000 ARV, that is a very manageable amount of cash out of pocket.
Draws in practice
You pay for a stage of work, request a draw, an inspector confirms completion, and the lender wires the funds. Turnaround runs from 24 hours to a week depending on the lender, and that difference matters enormously to your schedule.
Ask about inspection turnaround and whether the lender allows a materials draw before installation. Those two answers determine whether your contractor waits on you.
Experience tiers
Most lenders price on completed projects in the past three years. Experience affects leverage and terms. A first project generally means more equity and closer oversight than a track record does. Document every completion, including partnerships, because verified history is worth more than credit score on these files.
Plan for the exit and the overrun
Budget a contingency of at least 10% of the rehab, and confirm your refinance parameters in advance if the plan is to keep the property. The two ways flips go wrong are running out of money in month four and discovering a seasoning requirement in month six.
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