🏗️ Fix & Flip Loans 101: How to Finance, Rehab, and Profit Like a Pro
You've spotted a property that's got potential written all over it — maybe it's outdated, underpriced, or sitting too long on the market. You know it could shine with the right upgrades.
But when you call your traditional lender, they say, "We can't finance that condition."
That's where a Fix & Flip Loan comes in — short-term, fast-closing financing designed specifically for real estate investors who see potential where others see problems.
At Rockhouse Mortgage, we work with multiple fix & flip lenders to help investors close fast, get rehab funds released smoothly, and move from purchase to profit — or refinance into a DSCR loan for long-term cash flow.
💡 What Is a Fix & Flip Loan?
A Fix & Flip Loan is a short-term investment loan used to purchase and renovate a property with the intent to sell (flip) or refinance (hold).
Unlike traditional mortgages that focus on the borrower's income and credit, fix & flip loans focus on the asset itself — the property's current value, after-repair value (ARV), and your renovation plan.
Typical terms include:
- Loan term: 6–12 months
- Interest-only monthly payments
- Loan-to-cost (LTC): up to 90% of purchase + 100% of rehab costs
- Combined loan-to-ARV: up to 70–75%
- Closings in as little as 5–10 business days
Funds for renovations are typically released in draws, based on completed milestones (framing, drywall, flooring, etc.).
🧱 What Lenders Look For
Even though these are asset-based loans, investors should understand what lenders evaluate:
| Factor | Why It Matters |
|---|---|
| Experience | Lenders prefer borrowers with at least 1–2 prior flips but will work with first-timers with a solid plan. |
| Scope of Work | A detailed, itemized rehab budget builds confidence and speeds approval. |
| After-Repair Value (ARV) | Determines your max loan amount — typically capped around 70–75% of ARV. |
| Liquidity | You'll need reserves to handle overruns, taxes, utilities, and interest. |
| Exit Strategy | Lenders want to know how you'll pay off the loan — sell or refinance into DSCR. |
Pro tip: Even if you plan to flip, structure the deal with a backup refinance path. At Rockhouse, we help our clients line up that second option before they close.
🛠️ The Fix & Flip Process: Step-by-Step
- 1Find the Property – Identify undervalued or distressed homes through MLS, wholesalers, or auction platforms.
- 2Estimate Rehab Costs – Use a detailed contractor bid and budget spreadsheet (we can share our template).
- 3Calculate ARV – Use comparable sales ("comps") in similar condition to determine potential resale value.
- 4Submit for Financing – We collect your contract, scope of work, and ARV documentation for quick pre-approval.
- 5Close Fast – Most deals fund in 5–10 business days, so you can move before your competition does.
- 6Renovate – Funds are released in draws as work progresses.
- 7Exit – Sell for profit or refinance into a long-term DSCR or conventional loan for ongoing cash flow.
💸 Real-World Example
An investor in Charlottesville, VA purchased a 3-bedroom townhouse for $325,000, invested $40,000 in renovations, and sold it four months later for $440,000.
Their Rockhouse fix & flip loan covered:
- 85% of the purchase price
- 100% of the rehab budget
- 6-month term at 10.25% interest
After paying off the loan and closing costs, the investor cleared nearly $45,000 in net profit — and rolled those funds into their next deal.
⚠️ Common Mistakes to Avoid
- ✗Underestimating rehab costs – Always build in a 10–15% contingency.
- ✗Skipping permits or inspections – Lenders verify proper progress and local compliance.
- ✗No backup plan – Have a refinance option (DSCR or rental hold) ready if market timing shifts.
- ✗Ignoring carrying costs – Taxes, insurance, utilities, and interest add up quickly.
- ✗Overleveraging – Keep your LTC reasonable so you're never "house poor" mid-project.
Rockhouse Pro Tip: We help investors evaluate deals before they commit — from loan terms to projected ROI — so you can flip confidently, not blindly.
🔁 Flip to Hold: The Smart Investor's Strategy
Many of our most successful clients use a two-step strategy:
- 1.Fix & Flip Loan to acquire and renovate quickly.
- 2.DSCR Refinance to transition into a cash-flowing rental property once stabilized.
This combination allows you to grow your portfolio faster — without relying solely on W-2 income or tax returns.
Next week, we'll dig deeper into multi-unit property financing — how investors can use 2–4 unit properties to scale income and qualify for better long-term terms.
🧠 Final Thoughts
A fix & flip loan isn't just a fast-track to profit — it's a powerful tool for building long-term wealth when structured right.
At Rockhouse Mortgage, we make sure every investor understands their financing, exit plan, and next move.