A fix and flip loan is typically used by a real estate investor to buy a residential property promising potential profits once minor or major renovation work has been completed. Rehab’s can frequently be purchased for just below or at their fair market value. The real estate investor then fixes up the property and flips it (sells it) for a profit.
Banks do not make fix and flip loans today. They are restricted from underwriting speculative loans in their portfolio. Unless you have a lot of personal financial power, it is unlikely that you will be able to convince a bank to give you a fix and flip loan.
The lenders who are actually financing fix and flip loans today are the private money lenders (aka hard money lenders). Most hard money lenders will loan you around 75% of the purchase price and 80% of the rehab cost. It is then up to you to renovate the property and then sell it. This means you might be required to put down 25% of the purchase price, pay 20% of the renovation costs, and cover the loan payments (interest only) out of your pocket until you finally sell the property.
Essentially, a fix and flip loan is like a form of construction loan. The total cost of the project will include the purchase price of the project, plus the cost to renovate the property, plus the interest payments for up to 12 months. The fix and flip lender will then loan you a certain percentage of the total project cost; not to exceed 80%. The proceeds will then be controlled by the lender (like a construction loan) to ensure the proceeds are actually used to renovate the property.
Blackhawk offers the best approach to obtaining financing on a fix and flip loan, because we will match the right investor (or investors) for the specific type of fix and flip loan the borrower needs. Our unique brokering platform provides immediate access to multiple programs for investors that fix & flip properties, usually between a 6.0% –9.9% interest rate. Our flexible one to two-year loan terms will provide our borrowers the ability to fix & flip quickly or engage in an extended rehab.
Good candidates for a fix and flip loan are:
- A borrower who has successfully completed a prior fix and flip
- A borrower who has credit score of 650+
- A property that does not require a Loan to Value (LTV) ratio over 90%
- A desired minimum loan amount of $100K
- No recent bankruptcies, foreclosures, or tax liens
Our general guidelines for fundable fix and flip properties:
- The property is non-owner occupied (required)
- The property is located in the United States (includes Alaska & Hawaii)
- The fix and flip loan purpose is for a purchase, a refinance, a cash out refi, or a rehab
- The property Loan to Value (LTV) ratio is up to 80%
- The loan amount is between $100K and $10 Million
- The property type is Single Family Residence (SFR), 1-4 units (duplex, triplex, etc.), 5+ units, or Condos
Why Blackhawk is a preferred solution for fix and flip borrowers:
- The borrower makes interest only payments
- Loans are approved based on stated income and bank statements only
- There are no minimum FICO requirements
- We provide non-recourse, secured loans
- We offer pre-payment flexibility
If you are looking for a one to two-year mortgage with a fixed interest rate of between average 6.0% –9.9%, interest only payments, and no prepayments penalties, consider applying with Blackhawk. You can get prequalified in just 1 day, and our loans can get funded in as little as 10 days. If you are an investor interested in providing capital for fix and flip projects, please sign up to invest!