Fix-and-Flip Financing: How to Fund Your First Property Flip

You found the house. The bones are good, the neighborhood is turning over, and the numbers pencil out — on paper, at least. Then reality sets in: you don’t have $180,000 in cash sitting around to buy it, let alone the extra tens of thousands it’ll take to rip out the kitchen and re-do the roof. This is the moment where most first-time flippers stall out. They can spot a deal, but they don’t know how to fund it. That’s where fix and flip financing comes in, and understanding how it works is the difference between watching a good deal slip away and closing on your first project with confidence.

Fix and flip financing isn’t a mortgage in the traditional sense. It’s a short-term tool built specifically for investors who buy, renovate, and sell (or refinance) within months, not decades. Once you understand the mechanics, it stops feeling like a mystery and starts feeling like a plan.

How Fix and Flip Financing Actually Work

Traditional mortgages are built around your income and a property’s current condition. Fix and flip financing works differently. It’s designed around the deal itself — specifically, what the property will be worth after you’ve renovated it.

Here’s the basic structure:

Short repayment terms. Most fix-and-flip loans run 6 to 18 months. That timeline matches the reality of a flip: buy, renovate, sell, repeat. You’re not signing up for a 30-year commitment on a property you plan to unload before the year is out.

Purchase plus rehab, funded together. Instead of financing only the purchase price and leaving you to scrape together renovation cash separately, many fix-and-flip loans roll both into a single facility. Rehab funds are typically released in draws as work is completed and inspected, rather than handed over all at once.

Underwritten around ARV. ARV stands for after-repair value — what the property is projected to be worth once the renovation is finished, based on comparable sales in the area. Lenders use ARV, not the current “as-is” price, to determine how much they’re willing to lend. This is a core concept in fix and flip financing, because it’s what allows investors to borrow enough to cover both the purchase and the renovation, not just the purchase alone.

LTV governs how much you can borrow. LTV, or loan-to-value, is the percentage of a property’s value that a lender is willing to finance. In fix-and-flip lending, you’ll often see this expressed against ARV rather than purchase price. A lower LTV means you’ll need to bring more of your own cash to the deal; a higher LTV means less out of pocket, but usually comes with tradeoffs in pricing or lender requirements. Exact LTV thresholds vary by lender, property type, and market, so this is always a conversation to have directly with your lender rather than something to assume going in.

Points instead of (or alongside) rate alone. Points are an upfront fee charged as a percentage of the loan amount, paid at closing. One point equals one percent of the loan. Fix-and-flip lenders often charge points in addition to interest, and the number of points can shift based on your experience level, credit profile, and the specifics of the deal. We won’t quote figures here, since points, rates, and terms vary significantly by lender, market, and borrower profile — but it’s a line item you should always ask about and compare across offers.

Step-by-Step: Funding Your First Flip

1. Find and vet the deal first. Before you talk to a single lender, know your numbers: purchase price, estimated rehab cost, and a realistic ARV based on recent comparable sales, not wishful thinking. Fix and flip financing is only as good as the deal underneath it.
2. Build a real rehab budget. Walk the property with a contractor if at all possible. Vague estimates are one of the fastest ways to run out of money mid-project. Lenders will also want to see a scope of work, so this step does double duty.
3. Get pre-qualified before you’re under contract. Talking to a lender early tells you what kind of fix and flip financing you’ll likely qualify for and how much cash you’ll need to bring, so you’re not scrambling once you’re in escrow with a clock running.
4. Compare loan structures, not just headline pricing. Look at draw schedules, how rehab funds are disbursed, prepayment terms, and what happens if your timeline slips. The cheapest-looking offer isn’t always the one that sets you up to actually finish the project.
5. Close on the purchase. Once your fix and flip financing is in place and you’ve cleared due diligence, you close on the property, and the rehab clock starts.
6. Manage the renovation and draw process. Stay on top of contractor scheduling and inspection requirements for each draw. Delays here cost you money every single month your loan is outstanding.
7. Plan your exit before you need it. Whether your exit is a sale or a refinance into a longer-term rental loan, start lining it up well before renovation wraps, not after.

Common First-Timer Mistakes to Avoid

Underestimating the rehab budget. Surprises hide behind walls. Experienced flippers build in a contingency cushion; first-timers often don’t, and it’s usually the first thing that turns a promising deal into a stressful one.

Ignoring the timeline’s real cost. Every extra month on a short-term loan is another month of carrying costs — interest, insurance, utilities, and property taxes. A flip that runs three months over schedule doesn’t just delay your profit; it eats into it.

Chasing the lowest rate without checking the whole picture. The lowest advertised rate isn’t useful if the draw process is slow, the lender is inflexible on timeline extensions, or the fine print includes fees you didn’t budget for. Fix and flip financing should be evaluated as a full package, not a single number.

Overestimating ARV. It’s tempting to lean on optimistic comparables to justify a deal you’re excited about. A conservative, well-supported ARV protects you from borrowing against a number that never materializes.

Skipping a contingency reserve. Beyond the rehab budget itself, first-timers should hold back cash for the unexpected — a permitting delay, a slower-than-expected sale, an extra draw cycle. Deals with zero margin for error rarely survive contact with reality.

Ready to Fund Your First Flip?

Fix and flip financing gives first-time investors a real path from “I found a deal” to “I closed on a deal” — but the right structure matters just as much as the right property. If you’ve got a property in mind, or you’re getting close, the smartest next step is talking to a lender who works with fix-and-flip investors every day.

Get a fix and flip financing quote from Velocity Lending Solutions and find out what your first flip could look like.