A fix and flip loan (often called a hard money rehab loan) is short-term real estate financing specifically designed for real estate investors who purchase properties, renovate them, and sell them for a profit.

Unlike traditional bank mortgages, fix and flip loans base approval heavily on the After Repair Value (ARV) of the property and the investor's experience, rather than strict personal income verification (W-2s or tax returns).

These loans provide capital for both the initial property acquisition and the construction budget. Rehab funds are typically held in escrow and released in "draws" as work is completed.

The standard structure for a fix and flip loan covers two main components:

• Purchase Capital (LTC): Lenders typically fund between 75% to 90% of the initial purchase price (Loan-to-Cost). The investor brings the remaining percentage as a down payment.
• Rehab Capital: Lenders often fund 100% of the approved renovation budget.

The total loan amount is usually capped at a maximum percentage of the After Repair Value (typically 70% to 75% ARV). This ensures the lender has sufficient equity cushion once renovations are complete.

Terms generally run from 6 to 24 months, with interest-only payments required during the term. The principal is repaid in full when the property is sold or refinanced into a long-term rental loan (like a DSCR loan).

While easier to obtain than conventional bank loans, hard money flip lenders still look at key criteria:

• Experience: First-time flippers can get funded, but experienced investors (3+ flips in 3 years) receive higher leverage and lower interest rates.
• Credit Score: Minimum scores usually start around 620, with better terms available for 680+.
• Liquidity: You must show sufficient cash to cover the down payment, closing costs, interest reserves, and the first stage of renovations (since draws are provided as reimbursement).
• Entity: Loans must typically close in the name of a business entity (LLC or Corporation), not your personal name.