Fix-and-Flip Loans for Beginners

Fix-and-flip loans offer an easy way for new investors to get money quickly to purchase, renovate, and sell a home for profit. 

These are a type of hard money loan with short repayment terms and high interest rates—but as long as you can stick to your project plan and sell the house for a large profit, fix-and-flip loans can be a great way to fund your investment.

Not sure where to start? Below, we’ve rounded up the best fix-and-flip loans for beginners and also offer details about how fix-and-flip loans work, the pros and cons, and some alternative ways to borrow.

Fix-and-flip loans for beginners

Fix-and-flip loans offer a unique opportunity for real estate investors to finance property renovations and sell for a profit. These loans typically provide short-term funding, with terms and sizes varying based on the property’s value and renovation needs.

Interest rates for fix-and-flip loans can be higher than traditional mortgages due to the risk involved. We’ve selected five lenders that provide fix and flip loans for beginners, evaluating them based on loan amounts and terms, speed of funding, and flexibility regarding property condition.

Lender	Loan amounts	Minimum credit score
LendingTree	$10,000 – $1 million+	None
New Silver	$100,000 – $5 million	650
Bluevine	Up to $250,000	625
Kapitus	Up to $5 million	625
OnDeck	$5,000 – $250,000	625
Funding Circle	$25,000 – $500,000	660

LendingTree

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NMLS #1136 Terms and Conditions apply.

See personalized business loan offers

• Funding from $10,000 to $1 million+
• Explore offers from a network of lenders
• It doesn’t affect your credit score

LendingTree is an excellent resource for beginners entering the fix-and-flip market. It offers access to a broad network of lenders without requiring a hard credit check.

The key advantage for beginners using LendingTree is the ability to compare various loan offers from multiple lenders. This can help make a potentially complex process more streamlined to align with your financial needs and investment goals.

New Silver

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• Specializes in loans for real estate investors
• Quick approval and funding process
• Competitive rates for fix-and-flip projects

New Silver is ideal for beginners in fix-and-flip investing, especially those with bad credit. It offers specialized loan products for real estate investment projects, focusing on quick funding. This is crucial for beginners looking to swiftly close deals and start renovations.

New Silver’s approach to lending is characterized by its understanding of the real estate market, providing flexible solutions for investors. It offers a range of loan options, accommodating various project sizes and investor needs.

Bluevine

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• Provides lines of credit for ongoing renovation projects
• Flexible funding options with quick access to capital
• Simple and streamlined application process

Bluevine is suitable for beginners in fix-and-flip investing, offering lines of credit that provide continuous access to funds. This flexibility is particularly beneficial for beginners who may have multiple projects or need additional funding as renovation needs change.

Bluevine’s user-friendly platform makes the application process efficient, allowing beginners to focus on their investment projects. The flexible funding options enable investors to manage their finances effectively throughout the renovation process.

Kapitus

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• Tailored loan products for small to mid-sized businesses
• Offers financing solutions for various business needs, including real estate
• Competitive rates and terms for short-term loans

Kapitus caters to small and mid-sized businesses, including those involved in fix-and-flip projects. It offers tailored financing solutions that are ideal for beginners, especially those with poor credit.

Kapitus’s focus on customized loan products means it can provide loans that align with the specific needs of fix-and-flip projects.

Kapitus’s approach particularly benefits beginners looking for flexible and competitive financing options. The lender’s understanding of the challenges faced by new investors makes it a reliable choice for financing fix-and-flip projects.

OnDeck

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• Offers fast funding, often within 24 hours
• Specializes in short-term loans for business needs
• Streamlined application process for quick decisions

OnDeck is renowned for its quick funding, making it a great option for beginners in fix-and-flip investing. Its short-term loans are tailored to meet various business financing needs, including real estate investments. 

OnDeck’s efficient application process ensures quick decisions, essential for beginners needing to move fast in the competitive real estate market.

OnDeck’s focus on speed and simplicity makes it an attractive option for beginners, especially those with less-than-perfect credit. The lender’s ability to provide swift financial support can be crucial for successful fix-and-flip investments.

Funding Circle

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• Offers tailored loans for established businesses
• Competitive rates and flexible terms
• Focus on long-term financing solutions

Funding Circle provides tailored loan solutions for more established businesses, making it a viable option for beginners who have started establishing their fix-and-flip ventures. Its competitive rates and flexible terms benefit investors seeking long-term financing solutions.

Funding Circle’s commitment to building lasting relationships with borrowers means it offers support and guidance throughout the loan process. This can be invaluable for beginners in fix-and-flip investing, especially those looking to grow their business in the real estate market.

Pros and cons of fix-and-flip loans for beginners

Getting a hard money loan to fund a fix-and-flip real estate investment project offers several advantages to beginners, as well as some drawbacks:

Pros

• Easy approval

• Minimal risk

• Fast funding

Cons

• Short repayment terms

• High interest rates

• High overall cost

• Could be more work than you thought

Here’s a closer look at the benefits and risks.

Benefits of first-time fix-and-flip loans

Easy approval

Your credit score and experience with fix-and-flips (or lack thereof) won’t impact your ability to qualify. Instead, hard money lenders are solely interested in the perceived value of the property you’re purchasing, which is called the after-repair value (ARV). This makes it much easier to get approved. 

Minimal risk

When you buy a home to live in, the house serves as collateral for the loan; if you fall behind on the loan, the bank could foreclose on your home—and you’ll be out on the street. With a hard money loan, the only thing backing the loan is the house you’re flipping, so you don’t risk losing your home. 

Another highlight: Hard money lenders don’t generally report to the credit bureaus, so you don’t risk damage to your credit score if you miss a payment or default on the loan.

Fast funding 

The hard money loan process is generally much faster than a traditional home loan. You could get funds from a fix-and-flip loan in roughly a week, whereas a conventional mortgage could take a month or longer.

Risks of first-time fix-and-flip loans

Just because there are several benefits of fix-and-flip loans for beginners doesn’t mean there aren’t risks to weigh before applying. Among those risks are:

Short repayment terms

Hard money loans typically last between 12 and 24 months, which means you’ll only have one to two years to fix up and sell the house. If you don’t sell the house on time, you’ll still owe the full amount borrowed at the end of the loan—but may not have the cash to do so.

High interest rates

Because of the risk involved for the lender (and the convenience for the borrower), hard money lenders charge higher interest rates on fix-and-flip loans for real estate investors. Though it varies by lender, these might range from 8% to 15%.

Overall cost

When you get a fix-and-flip loan, you have a lot of costs to juggle, including:

• The final loan repayment at the end of the loan term
• Buying costs (title insurance, closing costs)
• Holding costs (property taxes, insurance, utilities)
• Selling costs (real estate agent fees, closing costs)
• Ongoing interest payments each month during the life of the loan 

If these costs become unmanageable, you may be unable to fund the renovations needed to flip the house.

More work than thought

Buying a home to flip is always a gamble. While you’re renovating the house, you may stumble upon way more problems than anticipated, which can quickly drive up the cost of the rehab. This could reduce your profit at the end—or even require securing additional funds to finish the job.

If you’re new to this game, it makes sense to consider doing the project jointly with an experienced house-flipper. I would stick with a lender familiar with the real estate fix-and-flip market.

Jim McCarthy

CFP®

How to get fix-and-flip loans for new investors

If you have found a property that’s too good to pass up and you’re ready to secure funding, you might be wondering how to get a fix-and-flip loan as a first-time investor. Luckily, the process is much easier than a traditional home loan procedure.

1. Learn how fix-and-flip loans work

Know what you’re getting into before you apply for a hard money loan. Set the right expectations about how quickly you’ll have to repay the loan, how high interest rates will be, and what will happen if you can’t sell the property.

The terminology involved in fix-and-flip loans will look slightly different from when you purchased your primary residence. Here are some terms to note:

• Loan-to-value ratio (LTV): LTV refers to how much a lender will give you compared to the estimated property value. Typically, lenders will loan up to 90% LTV.
• Loan-to-cost ratio (LTC): LTC refers to how much a lender will give you compared to anticipated project costs, including the purchase price of the home and all the renovation costs. Hard money lenders usually max out LTC at 80%.
• After-repair value (ARV): This is the property’s estimated value after the renovations—that is, how much you’ll hopefully sell the home for. 

2. Shop around for hard money lenders

Hard money loans have grown increasingly popular as more Americans look to invest in property and flip it for a profit. That means you have lots of options to consider.

Start by browsing the best investment property loans available to you, and prioritize options with low interest rates, longer (or more flexible) repayment terms, strong customer service, and other useful tools to help investors with their first and subsequent projects.

3. Put together a project plan

You can improve your odds by putting together a detailed project plan that includes data about your target property, your proposed budget, your estimated timeline, and any other pertinent information.

Specific lenders may have requirements for what they’d like to see when considering your application, so you may need to cater your plan to their guidelines.

4. Apply for the loan

Each fix-and-flip lender will have their loan application process, but it should be relatively straightforward. Some may do a credit check, but it usually doesn’t affect approval odds.

From application to funding, expect about a week. The lender will walk you through the paperwork and information needed for a successful application.

The fix-and-flip process is a double-edged sword. Done right, the long-term financial impact can be very positive. If done wrong, you will likely be tapping into personal funds to cover losses, which has a negative long-term financial impact.

Jim McCarthy

CFP®

Alternatives to fix-and-flip loans

Hard money fix-and-flip loans aren’t your only option when you want to buy an undervalued house, renovate it, and sell it for a profit. Consider these other borrowing options:

Home equity loans and HELOCs

If you own an existing property, like your primary residence or a long-term rental property, and you’ve built significant equity in the property, you might be able to get a home equity loan or home equity line of credit (HELOC). 

• Home equity loan: With a home equity loan, you’ll get a lump sum upfront, based on how much of your home you’ve paid off, and you’ll pay the loan off over a set number of years (anywhere from five to 30 years). Rates are fixed and generally lower than a fix-and-flip loan, but you may not be able to borrow enough to purchase a property and fund renovations.
• HELOC: A home equity line of credit is similar to a home equity loan, but it’s a revolving line of credit, much like a credit card. This could be convenient if you’re renovating multiple properties at once, but you should weigh the pros and cons of HELOCs before going this route.

Personal loans

The beauty of personal loans is that you can use them for almost anything, including funding a cash offer for an undervalued house and/or paying for the rehab. The catch? Personal loan rates can go as high as 36%, and loan amounts are usually capped at $100,000 max, but many lenders don’t go that high.

The best personal loans will offer competitive rates, low or no origination fees, and flexible repayment terms, which can make your fix-and-flip as a beginner a little less stressful.

401(k) loans

If you have a 401(k) through a traditional employer or as a self-employed individual, you can take out a loan against your current balance. Interest rates are low, but you risk losing out on investments if the market is favorable since there’s less in your account.

Business line of credit

Some banks and credit unions offer business lines of credit, which allow you to draw funds from a revolving line of credit as needed.

However, beginners will have a harder time qualifying; most financial institutions want to see a history of successful flips. This might be an option if you’re partnering with a more experienced real estate investor for your first flip.

FAQ

How do first-time fix-and-flip loans differ from traditional mortgages?

If you’re a beginner in the property investment game, it’s crucial to grasp the difference between fix-and-flip loans and traditional mortgages. 

A traditional mortgage is meant to buy a home to live in or potentially rent out. A fix-and-flip loan is a short-term loan meant to finance the purchase and improvement of a property that you intend to resell shortly after. 

Interest rates for fix-and-flip loans tend to be higher than traditional mortgages due to the risk of this type of investment. Fix-and-flip loan terms are often shorter, typically 12 months, with an option to extend if necessary.

Is a fix-and-flip loan the same as a hard-money loan?

They might seem similar, but a fix-and-flip loan and a hard-money loan are different. Both are used in real estate investment, but they serve different purposes. 

A hard-money loan is a type of financing in which the borrower receives funds based on the property’s value. It’s a loan secured by property.

A fix-and-flip loan is tailored toward real-estate investors who plan to renovate a property before reselling it. Its design takes into account the purchase price as well as the estimated repair costs.

Can you get fix-and-flip loans with bad credit?

Getting a fix-and-flip loan as a beginner with bad credit can be challenging, but it’s not impossible. Lenders are more interested in the potential value of the property you’re investing in than the state of your credit.

Some lenders provide loans to individuals with lower credit scores. However, rates and terms may be less favorable than those with stronger credit profiles. Improve your credit score for better loan terms, and always remember to borrow responsibly.

What additional costs are associated with fix-and-flip loans for new investors?

As a new investor interested in fix-and-flip loans, be aware of the added expenses associated with these loans. Besides the principal and interest, possible costs could include origination fees, underwriting fees, construction draw fees, and prepayment penalties. 

It’s also important to factor in renovation costs, holding costs (such as utilities and property taxes), and potential listing and broker fees when the property is sold. Always ensure you understand the total cost of the loan before you proceed.