INVESTOR GUIDE · FIX AND FLIP
Fix and flip loan sizing
90% of purchase, 100% of rehab and the 70% rule. The leverage gets you into the deal. Buying at the right price is what lets you refinance or sell on the back end.
Close in as little as 3 days* *on approved deals
The short answer
- Financing: 90% of the purchase price (10% down) plus 100% of the rehab, subject to ARV limits.
- Maximum allowable offer: ARV × 70% − rehab = MAO.
- Set your MAO and stay at or under it, and the refinance on the back end works. Buy the property well below 70% of ARV and on the refinance you’re pulling your initial down payment back out, plus the equity you bought, in cash.
THE LEVERAGE
90% of purchase, 100% of rehab
Size the loan at 90% financing on the purchase, 10% down, plus 100% of your rehab, subject to ARV limits and the program’s guidelines. See our fix and flip loans.
THE 70% RULE
Your maximum allowable offer
In the best-case scenario, you’re buying below 70% of ARV. The calculation:
ARV × 70% − rehab = MAO
Stay within that guideline and you’ll be safe on the refinance on the back end.
WORKED EXAMPLE
A $300K ARV flip
| ARV | $300,000 |
| × 70% | $210,000 |
| − Rehab | $50,000 |
| = MAO (maximum allowable offer) | $160,000 |
| Loan: 90% of purchase | $144,000 (you bring $16,000 down, plus closing costs) |
| Loan: 100% of rehab | $50,000 |
| Total hard money loan | $194,000 |
| Refinance at 80% of ARV | $240,000 |
| Cash back, before closing costs | $46,000 |
An 80% of ARV refinance at $240,000 pays off the $194,000 hard money loan and leaves $46,000 cash back, before closing costs. Negotiate a seller credit toward closing costs on the initial hard money purchase and you bring less cash out of pocket: you’re financing your closing costs. That’s the engine behind our SUPER BRRRR. Example for illustration only. Guidelines and leverage vary by lender and by state and may change.
BETTER THAN 70%
Negotiate below MAO
If you can negotiate seller concessions on closing costs, that cuts your cash out of pocket. And in a buyer’s market with heavy days on market, you can negotiate for 65% of ARV and even lower. Throw darts. That creates more equity, or a lower LTV on the refinance on the back end.
STRAIGHT ANSWERS
Fix and flip loan questions
How much can I borrow on a fix and flip loan?
Up to 90% of the purchase price and 100% of the rehab, subject to ARV limits and program guidelines.
What is the 70% rule in house flipping?
ARV × 70% − rehab = MAO, your maximum allowable offer. That number is your maximum purchase price. Buying at or below it protects the refinance or sale on the back end.
How much down payment do I need for a fix and flip?
Typically 10% of the purchase price, plus closing costs. Seller concessions on closing costs can lower your cash out of pocket.
KEEP READING
DSCR KINGS · INVESTOR FINANCING
Run your flip with us
Send the purchase price, rehab budget and ARV. We’ll size the loan and the refinance before you make the offer.
Business-purpose loans for investment properties only; not for owner-occupied homes. Lending guidelines, leverage and loan programs vary by lender and by state and are subject to change. Terms and approval depend on the property, the borrower’s credit and capital-partner guidelines and are not guaranteed. Examples are for illustration only.
