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What is a Fix & Flip Loan?

A Fix & Flip loan is a short-term bridge loan used to purchase property with the intent to sell (or rent) it for a profit after the renovations are complete. Fix & Flip loans require no personal income verification and very little documentation. They offer a great way to start leveraging your existing capital and generate more income with the ability to close & flip more projects at once.

Launch Financial Group finances both the acquisition and the renovation costs of the project. Simply bring your initial closing costs and we will fund the rest, including reimbursing you for the renovation costs as the work is completed.

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Pros

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  • Fast Money: Fix & Flip loans provide quick access to funds, allowing investors to purchase and renovate properties faster.

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  • Made for Property Investors: These loans are designed specifically for real estate investors, with flexible terms and higher loan-to-value ratios than traditional mortgages.

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  • Great ROI Potential: Fix & Flip loans offer the potential for high returns on investment, as successful flips can result in significant profits.

Cons

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  • Higher Interest Rates: Fix & Flip loans often come with higher interest rates which can make them expensive to repay.
     

  • Short Repayment Terms: These loans typically have short repayment terms, which can put pressure on borrowers to complete their renovations quickly.

 

  • Short Repayment Terms: Fix & Flip loans may not be the best option for borrowers who are looking for long-term financing solutions, as they are designed for short-term projects.

Example

Borrower: Jane, an experienced real estate investor

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Property Type: Single-family home
Location: Suburban area with a growing real estate market
Purchase Price: $150,000

Renovation Costs: $50,000
After Repair Value (ARV): Estimated at $350,000

Down Payment: $30,000 plus closing costs

Loan Amount: $170,000 (80% of Purchase + Reno Costs)
Loan Term: 12 months
Interest Rate: 11%

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In this scenario, Jane secures a Fix & Flip loan to acquire and renovate a property, aiming to sell it for a higher price in less than a year. Renovations include kitchen and bathroom upgrades, flooring, painting, and other necessary repairs to increase the property's value. The loan provides her with the necessary funds for the purchase and renovations. With an anticipated sale price of $350,000, Jane will be able to repay the loan, cover closing costs, and generate a considerable profit within approximately 6 months.

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