Fix & Flip Loans — Short-Term Bridge Financing for Investors

What a fix and flip loan is

A fix and flip loan is a short-term (12–24 month) business-purpose bridge loan that funds both the purchase and renovation of an investment property. Interest accrues only on funds drawn, and the loan is paid off when the property sells or refinances into permanent DSCR financing. Because it is a business-purpose loan for a non-owner-occupied property, it is originated under Regulation Z's business-purpose exemption.

How the structure works — the actual mechanics

The lender funds a portion of the purchase at closing (Loan-to-Cost, or LTC) and holds back the renovation budget in an escrow account. As work is completed, the investor requests draws; a third-party inspector verifies progress before each release. Interest accrues only on funds actually drawn.

• LTC (Loan-to-Cost): percentage of the total project (purchase + rehab) the lender funds — typically 80–90% for experienced investors.
• LTP (Loan-to-Purchase): percentage of purchase price funded at closing — 80–90% typical.
• Rehab holdback: up to 100% of the approved scope, released in draws.
• ARV cap: total funding capped at 70–75% of the appraised After-Repair Value.

Cosmetic rehab vs. structural rehab vs. bridge — how the programs differ

Investor short-term lending splits into distinct programs, and picking the wrong one is the most common reason a file gets re-underwritten mid-process:

• Cosmetic rehab: non-structural, non-gut projects. Entity borrowers only, no experience minimum, 660 minimum FICO, up to 95% loan-to-cost and 75% of ARV, loan amounts $100,000 to $3,000,000 (over $1,000,000 requires committee approval), 12–24 month interest-only term with no prepayment penalty. Borrowers with 0–1 prior projects are capped at a $250,000 rehab budget. Adding square footage, adding a story or ADU, removing load-bearing or exterior walls, conversions, full gut rehabs down to the studs, and properties with extensive fire or water damage all fall outside this program.
• Structural rehab: for the heavier scopes a cosmetic project excludes. 660 minimum FICO, up to 90% loan-to-cost and 75% of ARV, and an experience minimum of completed projects in the last three years with at least one structural rehab. Budgets can be funded up to 100% with borrower equity contributed up front; a budget funded entirely by the borrower is not eligible.
• Short-term bridge (no rehab): stabilized short-term financing at up to 80% as-is LTV, 700 minimum FICO, $100,000 to $3,000,000, 12–24 month interest-only, no prepayment penalty, cash-out capped at $250,000 (unlimited at 50% LTV or less). Entity borrowers only, C4 minimum property condition with no rehab or rehab holdbacks, and an experience minimum of 2+ investment properties rehabbed or constructed and sold or stabilized in the last three years.

Across these programs, terms longer than 15 months require management approval, appraisals are ordered as either a third-party hybrid valuation or a full third-party appraisal (transfer appraisals are not accepted) with an internal valuation review either way, and certain markets are restricted or exception-only. Simply Approved Mortgages is licensed in a limited number of states — your loan officer will confirm availability for your property and market.

Experience tiers — how lenders actually price your leverage

Most rehab and bridge lenders assign a borrowing tier based on verified completed transactions in the last 36 months, and that tier sets both your maximum leverage and your minimum score. A representative tier structure:

• Tier 2 (1–4 completed transactions): 700 minimum score, up to about 85% blended loan-to-cost with 100% of the rehab budget funded, 90% of the property-value-basis cost, and 70% of after-repair value. Heavy rehab is generally not eligible at this tier.
• Tier 3 (5–11 transactions, roughly $2,000,000 cumulative sales price): 680 minimum score, up to about 90% blended loan-to-cost and 75% of after-repair value.
• Tier 4 (12–23 transactions, roughly $4,000,000): 660 minimum score, up to about 90% blended loan-to-cost, 92.5% of the property-value basis, and 75% of after-repair value.
• Tier 5 (24+ transactions, roughly $6,000,000): same 660 floor with the highest leverage available on the program.

Common overlays: anything above roughly 85% property-value-basis loan-to-cost is limited to light rehab, cash-out files typically lose 5% of the after-repair-value cap, and individual properties valued at $4,000,000 or more (or cumulative projects at $5,000,000 or more) can take a 5% reduction to blended loan-to-cost and after-repair value at underwriting discretion. Foreign national investors are usually capped several points lower on both measures.

Profitability test: many programs require that the after-repair value less total project costs, the origination fee, and six months of debt service is greater than zero — a deal that only pencils on a perfect exit will not be approved. Terms are commonly a 13- or 19-month interest-only balloon on rehab, and 13, 19, or 24 months with a possible 3-month extension on bridge.

Bridge specifics: stabilized bridge programs commonly require a 700 score, about $20,000 in liquidity, 75% loan-to-value at the entry tier and up to 80% for experienced borrowers, cash-out capped near 65% loan-to-value, and a six-month seasoning requirement on refinances. Property must be single-family, condo, or 1–4 unit in C1–C4 condition; C5 and C6 are ineligible, and properties under $100,000 in value are generally excluded (portfolio loans can go as low as $75,000 per property).

Who this fits

Active real estate investors executing 1–20+ flips per year, and BRRRR (buy-rehab-rent-refinance-repeat) operators who plan to hold via a DSCR refinance after stabilization. First-time flippers can qualify with a licensed GC, lower leverage, and additional reserves.

What to expect

You will provide a scope of work, a licensed contractor bid, comparable sales supporting the ARV, and proof of liquidity for the down payment and rehab overrun cushion. Prior flip experience improves LTC and pricing.

Rates, fees, and leverage shown anywhere on this site are illustrative and not a quote, lock, offer, or commitment to lend. Binding figures appear on your Loan Estimate or Term Sheet.

How fix-and-flip financing is structured and regulated

Fix-and-flip loans are business-purpose financing for investors, not consumer mortgages, which changes both what protections apply and how the loan is underwritten.

Program parameters above are published by the agencies and enterprises named in the right-hand column and can change. They describe program rules, not an offer; eligibility, terms, conditions, and availability vary by borrower, property, lender, loan program, and state, and all loans are subject to lender underwriting and approval.

Why this is underwritten as a project, not a mortgage

A traditional mortgage underwriter asks whether a borrower’s income supports a monthly payment over decades. A fix-and-flip lender asks a different question entirely: does this specific project, at this specific purchase price and this specific rehab budget, produce enough after-repair value to repay the loan and leave the investor a margin? That shifts the center of gravity from the borrower’s income statement to the deal’s numbers — the purchase price, a realistic and itemized rehab scope, comparable sales supporting the after-repair value, and the investor’s history of executing similar projects.

Borrower credit and liquidity still matter, particularly for less experienced investors, but an experienced flipper with a strong track record and a well-underwritten deal will often get more favorable consideration than a first-time investor with excellent personal credit but a thin or unrealistic project plan.

Where the risk actually lives in a flip

Two numbers make or break a flip: the rehab budget and the exit price. Underestimating renovation costs is the most common failure mode — unexpected structural, electrical, or plumbing issues discovered mid-project routinely blow past initial estimates, and a draw-based disbursement schedule means the investor has to fund overages before the next draw releases. On the other side, an after-repair value based on optimistic comparables rather than a conservative, defensible analysis can leave a project unable to sell for enough to cover the loan, the rehab cost, holding costs, and selling costs together.

Holding costs are frequently underweighted as well: property taxes, insurance, utilities, and loan interest accrue every month the project is unsold, and a flip that takes twice as long as planned can erode a margin that looked comfortable on paper.

What a fix-and-flip lender documents on the deal and the borrower

The project file typically carries as much weight as the borrower’s personal financial file.

Documentation requirements vary by lender, program, and file. The list above describes what underwriting commonly accepts, not a determination about your income or your approval.

Fix-and-flip financing versus the other ways to fund a renovation resale

The right structure depends on experience level, project size, and how the resale is timed.

A worked example: what a flip budget actually has to survive

Illustrative only. Not a quote, lock, offer, or commitment to lend; binding figures appear on your loan documents. Figures are round numbers chosen to show the method.

An investor buys a property for $220,000 with a $60,000 rehab budget, targeting a $340,000 after-repair value based on three comparable sales. Total project cost is $280,000; the projected margin before financing and selling costs looks like $60,000.

Now subtract realistic costs the initial napkin math often skips: roughly $20,000 in selling costs at typical commission and closing-cost percentages, six months of holding costs (loan interest, taxes, insurance, utilities) that might total $9,000, and a 15 percent rehab contingency of $9,000 for the inevitable surprises. The margin that looked like $60,000 is closer to $22,000 once those are included — and if the rehab takes nine months instead of six, or the resale price lands at the low end of the comparable range, the margin can evaporate or turn negative.

Illustrative only. Figures are examples used to show the arithmetic and are not a quote, lock, offer, or commitment to lend; binding figures appear on your Loan Estimate.

How this applies in Florida and Colorado

Florida. Florida flips carry state-specific costs that eat into margin fast: documentary stamp tax and, in some counties, surtax on the deed at resale, plus windstorm and, where applicable, flood insurance during the holding period; investors should also budget time for any required Florida building permits and inspections, which can extend a project timeline in busier permitting jurisdictions.

Colorado. Colorado flips in the Denver metro and mountain resort markets often face longer permitting timelines than the initial project schedule assumes, and properties in wildfire-exposed areas may need updated insurance underwriting before resale; investors should also confirm any HOA or historic-district approval requirements before starting exterior renovation work.

Simply Approved Mortgages LLC arranges residential mortgage loans in Florida and Colorado, so the two applications above are the ones we can act on for a consumer file. Business-purpose loan products may be arranged in additional states only where permitted by applicable law and pursuant to applicable licensing requirements or exemptions.

How a fix-and-flip loan typically moves from acquisition to resale

Every stage after closing is tied to the draw and inspection cycle.

1. Underwrite the deal before making an offer. Model purchase price, rehab budget with contingency, holding costs, selling costs, and a conservative after-repair value before committing.
2. Secure financing sized to loan-to-cost and loan-to-ARV limits. Confirm both caps with the lender; whichever is more restrictive sets the maximum loan amount.
3. Close and fund the rehab escrow. Renovation dollars are held back and released only against inspected, completed work.
4. Execute the rehab and manage draws. Request draws as milestones complete, and keep contingency reserves available for overages.
5. List and sell within the loan term. Price the resale against current, not aspirational, comparable sales, and account for the loan’s maturity date.
6. Close the sale and retire the loan. Confirm the payoff is applied in full and the lien released at the closing table.

Mistakes that cost people money on this

• Underestimating the rehab budget and running out of draw funds mid-project.
• Basing the after-repair value on optimistic rather than conservative comparable sales.
• Ignoring holding costs that accrue every month the project remains unsold.
• Not budgeting a contingency reserve for unexpected structural, electrical, or plumbing findings.
• Underestimating permitting and inspection timelines in the local jurisdiction.
• Treating the loan’s maturity date as flexible when an extension is not guaranteed in the note.
• Skipping a realistic selling-cost estimate when projecting the exit margin.

Is this the right move for your situation?

The honest answer depends on the file. These are the patterns we see on both sides.

Usually a good fit when

• You have a realistic, itemized rehab budget with a contingency reserve built in.
• Your after-repair value is supported by recent, comparable, conservatively selected sales.
• You have reserves to cover overages and holding costs if the project runs long.
• You, or your team, have a track record of completing similar projects.

Usually not the right move when

• The projected margin only works if every cost and timeline assumption is optimistic.
• You have no reserves beyond the loan proceeds to absorb overages.
• This is your first project and the scope involves significant structural work.
• Local permitting timelines in your market are long relative to the loan’s term.

None of this is a determination about your file. A Simply Approved Mortgages Loan Officer can run your actual numbers and show you what your disclosures would say.