Bridge Loans for Fix-and-Flip Properties

Fix-and-flip bridge loans offer short-term financing to buy, remodel, and resell properties for a profit. You might use a fix-and-flip loan to cover the costs of renovating, listing, and selling the home. 

This type of loan can help pay for repairs, but it can come with high interest rates. Plus, most fix-and-flip loans use the property as collateral, meaning you could lose the home if you can’t repay your loan. Read on for a closer look at how bridge loans for house-flipping work, along with their pros, cons, and where to apply. 

How does a bridge loan for fix-and-flip properties work? 

Fixing up real estate and reselling it for a profit can be a lucrative business, but you may need financing to cover the costs of purchasing, renovating, and selling the home. Bridge loans for fix-and-flip properties offer funding for this purpose. 

Fix-and-flip loans are short-term loans that often span 12 to 24 months. Interest rates are typically higher than what you’d get on a mortgage or home equity loan, but lenders may offer more competitive rates for experienced investors. 

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Tip

Fix-and-flip bridge loan interest rates can range from 7% to 12% or higher. The exact rate can depend on the risk associated with the loan as assessed by the lender. Higher-risk projects or borrowers with less experience or lower credit scores may face higher interest rates. Lenders may also charge origination fees or points on the loan. These can range from 1% to 3% (or more) of the total loan amount. Additional fees for loan processing, document preparation, and underwriting may also apply.

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The amount you can borrow will depend on several factors, including the value of the home and its anticipated after-repair value (ARV). Bridge loan provider Kiavi, for example, lets you borrow up to 95% of a home’s purchase price and up to 80% of its ARV. 

Some fix-and-flip loans, such as the ones Kiavi offers, are known as hard money loans. Hard money loans may have more flexible borrowing criteria than conventional bank loans, as well as faster funding times. 

Where to get a bridge loan for fix-and-flip properties

Finding the right bridge loan provider can have a massive impact on your success in the fix-and-flip real estate market. 

Let’s dive into a detailed review of five top-rated providers. You can click the lender’s name in the table to jump to more details about its bridge loans, or keep reading for more about all five.

Lender	Funding time
LendingOne	1 week
Kiavi	10 days
RCN Capital	Not disclosed
Fort Knox Capital	2 weeks
Stratton Equities	21 – 35 days average

LendingOne

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• Known for quick, reliable funding
• Personalized loan options
• Provides expert guidance and support

LendingOne stands out for its impressive track record in providing quick and reliable funding. With an array of personalized loan options, it can cater to the diverse needs of fix-and-flip investors. The company also prides itself on offering expert guidance and support to ensure you make the most suitable financial decisions.

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Kiavi

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• Simplistic, streamlined loan process
• Competitive rates and terms
• Strong customer service orientation

Investors appreciate Kiavi’s simplified loan process, which can make your real estate investment journey much smoother. It offers competitive rates and terms you can tailor to your unique needs, enhancing your financial flexibility. Furthermore, Kiavi’s strong customer service will ensure a positive lending experience.

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RCN Capital

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• Fast and efficient loan approval process
• Wide range of lending options
• Emphasizes transparency and integrity

RCN Capital stands out for its speed and efficiency in loan approvals, a critical factor for the fast-paced fix-and-flip market. It offers a wide range of flexible lending options to cater to individual needs. With a strong emphasis on transparency and integrity, RCN Capital fosters trust with its clients, ensuring a positive lending experience.

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Fort Knox Capital

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• Customized loan solutions
• High LTV ratios
• Fosters long-term relationships with clients

Fort Knox Capital offers customized loan solutions tailored to your investment needs, ensuring you get a loan that fits your project. The company provides high loan-to-value ratios, which can mean more cash for your investment. Fort Knox Capital also prides itself on long-term relationships with its clients, ensuring ongoing support and assistance.

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Stratton Equities

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• Nationwide lending services
• Diverse loan products
• Responsive and professional staff

Stratton Equities is known for its broad geographical reach, with nationwide lending services catering to customers from different regions. It offers diverse loan products, providing multiple choices to real estate investors. Stratton’s responsive and professional staff is always ready to provide support, ensuring a smooth lending process.

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How to get a bridge loan for fix-and-flip properties 

The eligibility requirements for a fix-and-flip bridge loan will vary by lender, but here are several common criteria you may need to meet: 

• Minimum credit score: Lenders may review your personal credit score when evaluating your application for a loan. On the FICO scoring model, a good score starts at 670, a very good score starts at 740, and an exceptional one is 800 or higher. 
• Business plan: Lenders want to see a detailed plan that goes over the costs of flipping the home, as well as your expected profit. This plan is sometimes known as a scope of work. Providing a comprehensive estimate of your budget and financial projections will help reassure the lender that your project is worth the investment. 
• Collateral: Fix-and-flip loans often use the property as collateral. That means the lender can seize the home if you fail to pay back your loan.
• Time in business: If you’ve already fixed-and-flipped homes, you may have a better chance of qualifying for the loan and accessing more competitive interest rates. 
• Property appraisal: You may need an appraisal of the property to assess its current market value. The lender may also send out an inspector to confirm you’ve completed each phase of the rehab process. 

Pros and cons of a bridge loan for fix-and-flip properties

Like any financial decision, borrowing a bridge loan for a fix-and-flip property has pros and cons. Consider the following before you borrow.

Pros

• Financing for home repairs

  Fix-and-flip bridge loans offer funding in the competitive real estate market so house flippers can invest in properties. Used wisely, a bridge loan can have a high return on investment after the investor sells the property for a profit. 

• Fast funding

  Some bridge loans can be funded in a matter of days, giving you fast access to the funds you need. This quick funding can help you move on properties rather than wait around for financing to come through. 

• Control over your project

  You can use a fix-and-flip loan for any expense that goes into improving and selling the property, giving you control over the house-flipping process. 

Cons

• High interest rates

  Bridge loans typically come with higher interest rates and fees than conventional mortgages or home equity loans. 

• Short repayment terms

  You may only have a year or two to pay back your bridge loan. If you run into delays with home repairs, you could have trouble repaying your loan and risk losing your property. 

• May not cover the total costs

  The costs of home renovations can be unpredictable, especially if you run into delays with permits or inspection issues. If you want a more flexible borrowing option, you may prefer a line of credit to a bridge loan. 

Should you get a fix-and-flip bridge loan? 

Consider a fix-and-flip bridge loan if…	Reconsider a fix-and-flip bridge loan if…
✅ You have a clear and comprehensive business plan	❌ You’re brand-new to house flipping
✅ You can fix and flip the property in a short time frame	❌ Your project has unpredictable costs
✅ You’ve compared all your financing options	❌ You can find a more affordable financing option elsewhere

A fix-and-flip bridge loan can be a useful financing tool in the fast-paced and competitive real estate market, but it might not be right for every situation. Here are scenarios where a fix-and-flip bridge loan could make sense: 

• You have a clear and comprehensive business plan: A detailed plan is essential for obtaining the fix-and-flip financing you need. You’ll need to present a lender with all the details of your proposed project, including an estimate of your budget, timeline, and return on investment. 
• You can fix and flip the property in a short time frame: Fix-and-flip loans are short-term loans that often span one or two years. They may be a good fit if you can finish your project and repay your loan in full and on time. 
• You’ve compared all your financing options: Fix-and-flip loans can come with high interest rates, so review other sources of financing before you borrow. Research your options so you can make an informed decision about what loan type best meets your needs. 

On the other hand, you may want to reconsider a fix-and-flip bridge loan if any of the following apply: 

• You’re brand-new to house flipping: If you’ve never flipped a home before, it may be risky to take on debt for your first attempt. Plus, you may get stuck with higher interest rates than a borrower who has successfully flipped homes in the past. 
• Your project has unpredictable costs: A fix-and-flip loan offers a fixed amount upfront, but you may find yourself in need of additional financing if unexpected expenses arise. In this case, a line of credit may be preferable due to its flexibility. 
• You can find a more affordable financing option elsewhere: Fix-and-flip loans can have higher interest rates than some other types of loans. If you can find another financing option with better rates, you could reduce your costs of borrowing.

Our expert’s advice for first-time flippers

Natalie Slagle

CFP®

I would not advise a client to use a fix-and-flip bridge loan on their first project. Given the environment we’re in (in March 2024), it’s best that these types of loans are used by those who have experienced the unpredictable costs, rigid timelines, and financial hurdles of fixing and flipping for profit. Instead, consider alternative financing to complete your first fix-and-flip. This may include using the equity in your personal residence, liquidating investments from a brokerage account, or borrowing from a 401(k).

Alternatives to a fix-and-flip bridge loan

A bridge loan isn’t your only option for a fix-and-flip project. Here are alternative financing options to consider: 

• Home equity loan or HELOC: If you already own the fixer-upper or another property, you can borrow against your equity with a home equity loan or line of credit (HELOC). A home equity loan offers a lump sum of funding upfront. A HELOC is a revolving line of credit you can draw on as you need cash and repay as you go. 
• Personal loan: Home equity loans and HELOCs are secured by the property, but personal loans are typically unsecured loans that don’t require collateral. Interest rates can range from 6% to 36%. You’ll need decent credit and a source of income to qualify. 
• Business line of credit: If you’re an experienced real estate investor, you may qualify for a business line of credit. As with a HELOC, you can draw on a business line of credit as needed and only pay interest on the amount you borrow. 
• 401(k) loan: Taking out a loan against your 401(k) retirement savings may also be an option. You’ll need to repay the amount within five years and could face penalties and taxes if your repayment exceeds that limit. You might also need to repay the loan in full if you leave your employer for any reason. Draining money from your 401(k) can be risky, though, and could leave you with insufficient funds when you’re ready to retire. 
• Seller financing: You may be able to finance your project through the seller of the property. You’ll usually repay the seller on a monthly basis, and the approval requirements may be less strict than a traditional loan.