What Are Lenders Looking for Before Approving a Fix and Flip Deal?
Lender · White Bear Lake, MN · Member since 2026 · 22 posts · 4 votes
What Are Lenders Looking for Before Approving a Fix and Flip Deal?
13 Replies
- 2moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 517 votes
The fix and flip deal is being underwritten based on the property purchase price, the location (for example, what state is it located in, is it rural or a declining market), borrower credit score, line item rehab budget and ARV.
Generally, if rural, it will be much more difficult to get fix and flip financing. Declining markets make it more difficult as well. The state that the property is located in matters as lender options vary state by state. Analyzing all of those details will be considered to see if there's a potential deal, and if so, what loan to value on the purchase price will be offered to the investor.
Bright Skyline518 Reviews- Lender · White Bear Lake, MN · Member since 2026 · 22 posts · 4 votes2moThanks for sharing! I agree that the purchase price, location, borrower profile, rehab budget, and ARV all play an important role in determining the structure and leverage available. I appreciate the insight into how rural and declining markets can affect financing options as well.
Quote from @Stacy Raskin:
The fix and flip deal is being underwritten based on the property purchase price, the location (for example, what state is it located in, is it rural or a declining market), borrower credit score, line item rehab budget and ARV.
Generally, if rural, it will be much more difficult to get fix and flip financing. Declining markets make it more difficult as well. The state that the property is located in matters as lender options vary state by state. Analyzing all of those details will be considered to see if there's a potential deal, and if so, what loan to value on the purchase price will be offered to the investor.
- 2moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 517 votes
Quote from @Ron Barrett:
Thanks for sharing! I agree that the purchase price, location, borrower profile, rehab budget, and ARV all play an important role in determining the structure and leverage available. I appreciate the insight into how rural and declining markets can affect financing options as well.Quote from @Stacy Raskin:
The fix and flip deal is being underwritten based on the property purchase price, the location (for example, what state is it located in, is it rural or a declining market), borrower credit score, line item rehab budget and ARV.
Generally, if rural, it will be much more difficult to get fix and flip financing. Declining markets make it more difficult as well. The state that the property is located in matters as lender options vary state by state. Analyzing all of those details will be considered to see if there's a potential deal, and if so, what loan to value on the purchase price will be offered to the investor.
Thanks Ron for your response- I appreciate it.
Bright Skyline518 Reviews
- Lender · Boca Raton · Member since 2026 · 5 posts · 4 votes2mo
For a fix and flip, the following is asked to underwrite the investor AND the deal.
- experience (how many completed projects in the last 36 months)
- minimum credit (usually 680 or above is acceptable)
Then you focus on the deal, location, price, rehab and after repair value.
I hope the above helps.
- Specialist · NJ · Member since 2022 · 1k+ posts · 656 votes2mo
So, they wait for the appraisal. They'll let anyone apply, put their own numbers down on the application for ARV and if they pass the credit and want to order the appraisal the lender will have no problem because the appraisal is on the borrower. Once the appraisal comes back, now we have as-is numbers, ARV numbers, you can get a rent study done. Now the loan parameters can be set, and they can be wildly different than what the applicant was quoted because the numbers are different. The appraisal is what the lender really relies on to tell the story of the property and its potential.
That's why when appraisers are not honest as the case in Philly and Balt and other cities, it screws up the entire industry.
- Lender · White Bear Lake, MN · Member since 2026 · 22 posts · 4 votes2mo
Quote from @Mike Klarman:
So, they wait for the appraisal. They'll let anyone apply, put their own numbers down on the application for ARV and if they pass the credit and want to order the appraisal the lender will have no problem because the appraisal is on the borrower. Once the appraisal comes back, now we have as-is numbers, ARV numbers, you can get a rent study done. Now the loan parameters can be set, and they can be wildly different than what the applicant was quoted because the numbers are different. The appraisal is what the lender really relies on to tell the story of the property and its potential.
That's why when appraisers are not honest as the case in Philly and Balt and other cities, it screws up the entire industry.
Yeah, that makes sense. At the end of the day, the appraisal really helps determine how the lender can structure the deal. If the numbers come back different than expected, the terms can change pretty quickly. Definitely important to have realistic numbers going in! Thanks Mike
- 2moRenard BrownPro MemberAustin, TX · Member since 2026 · 55 posts · 6 votes
From our desk as a direct lender, here is what shifts a file from "risky" to "funded" in our underwriting room:
What Makes Us Comfortable
Detailed Scope of Work (SOW): A line-itemized rehab budget with contractor bids and a 10% to 15% contingency reserve. Generic, single-line numbers for a full renovation are an immediate red flag.
Realistic Draw Schedule & Liquidity: Fix-and-flip loans work on a draw-reimbursement model. We want to ensure the borrower has enough liquid reserves to fund the first scope of work before requesting their initial inspection draw, plus 3–6 months of holding costs.
Hyper-Local ARV Comps: Comps within a 0.5-mile radius, matching property style, age, and square footage. Pushing for an ARV based on an outlier sale across a major highway or in a different school district adds unnecessary risk.
A Viable Plan B (Dual Exit Strategy): We love seeing an investor who targets a retail sale (Plan A), but also has the numbers underwritten to refinance into a long-term DSCR loan (Plan B) if market conditions shift or retail buyers slow down.
What Creates Discomfort
Timeline Optimism: Expecting a complete gut job or structural addition to finish, stage, list, and close within 60 to 90 days. Permitting alone can eat up weeks.
Zero Contingency: Assuming nothing will go wrong once walls are opened up.
High Leverage with Zero Skin in the Game: Borrowers expecting 100% total cost financing with zero cash reserves or liquidity buffer.
Key Takeaway for Newer Investors
The hardest lesson for first-time flippers to wrap their heads around is the draw reimbursement process. Many assume the lender hands over 100% of the rehab money at closing. In reality, you must complete the work first, pass a quick draw inspection, and then receive the funds. Having strong initial liquidity keeps your project moving smoothly without contractor delays.
📲 Have a Fix & Flip or Bridge deal you'd like us to underwrite?
- Lender · White Bear Lake, MN · Member since 2026 · 22 posts · 4 votes2mo
Quote from @Renard Brown:
From our desk as a direct lender, here is what shifts a file from "risky" to "funded" in our underwriting room:
What Makes Us Comfortable
Detailed Scope of Work (SOW): A line-itemized rehab budget with contractor bids and a 10% to 15% contingency reserve. Generic, single-line numbers for a full renovation are an immediate red flag.
Realistic Draw Schedule & Liquidity: Fix-and-flip loans work on a draw-reimbursement model. We want to ensure the borrower has enough liquid reserves to fund the first scope of work before requesting their initial inspection draw, plus 3–6 months of holding costs.
Hyper-Local ARV Comps: Comps within a 0.5-mile radius, matching property style, age, and square footage. Pushing for an ARV based on an outlier sale across a major highway or in a different school district adds unnecessary risk.
A Viable Plan B (Dual Exit Strategy): We love seeing an investor who targets a retail sale (Plan A), but also has the numbers underwritten to refinance into a long-term DSCR loan (Plan B) if market conditions shift or retail buyers slow down.
What Creates Discomfort
Timeline Optimism: Expecting a complete gut job or structural addition to finish, stage, list, and close within 60 to 90 days. Permitting alone can eat up weeks.
Zero Contingency: Assuming nothing will go wrong once walls are opened up.
High Leverage with Zero Skin in the Game: Borrowers expecting 100% total cost financing with zero cash reserves or liquidity buffer.
Key Takeaway for Newer Investors
The hardest lesson for first-time flippers to wrap their heads around is the draw reimbursement process. Many assume the lender hands over 100% of the rehab money at closing. In reality, you must complete the work first, pass a quick draw inspection, and then receive the funds. Having strong initial liquidity keeps your project moving smoothly without contractor delays.
📲 Have a Fix & Flip or Bridge deal you'd like us to underwrite?
Great breakdown, Renard! Really good points, especially about having realistic ARV comps, enough liquidity for the draw process, and a solid Plan B. A lot of newer investors don't realize how important those details can be until they're already in the middle of a deal.
- 1moNicholas FloydBusiness MemberNY · Member since 2026 · 322 posts · 102 votes
One thing that I found that works for my fix and flip clients is business funding for the reason of
1. 0%apr for 9-12 months( if the apr period runs out we do a rinse and repeat
2. the utilization doesn't report to the credit bureaus, so you can spend however you need to without worrying about your credit score dropping due to utilization
3. I have a relationship with the underwriters of the banks, I know there lending requirements as well as how there business needs to be structured so it's an automatic approval
- Lender · White Bear Lake, MN · Member since 2026 · 22 posts · 4 votes1mo
Quote from @Nicholas Floyd:
One thing that I found that works for my fix and flip clients is business funding for the reason of
1. 0%apr for 9-12 months( if the apr period runs out we do a rinse and repeat
2. the utilization doesn't report to the credit bureaus, so you can spend however you need to without worrying about your credit score dropping due to utilization
3. I have a relationship with the underwriters of the banks, I know there lending requirements as well as how there business needs to be structured so it's an automatic approval
That’s an interesting strategy, especially for investors looking to preserve liquidity during a fix and flip. I’d still compare the overall cost, approval requirements, and available credit against traditional private money, since the best structure really depends on the specific deal and exit strategy.
- 1moNicholas FloydBusiness MemberNY · Member since 2026 · 322 posts · 102 votesThat’s exactly why I look at business funding as one piece of the overall capital strategy instead of a replacement for private or hard money. For the right borrower, a 0% APR business credit card for 12 months can be useful for rehab materials, operating expenses, carrying costs, or preserving cash reserves without paying interest during that introductory period. The important part is having the exit strategy figured out before using the capital. Ideally, the balance is paid down from the sale or refinance of the property before the 0% period expires. If the project runs longer, there should already be a backup plan—such as refinancing the balance into a lower-cost business line or term product if qualified—rather than letting it roll into a high-interest rate. I always look at the entire deal, expected timeline, cost of capital, and exit strategy before deciding whether business funding, private money, or a combination of both makes the most sense.
- Lender · White Bear Lake, MN · Member since 2026 · 22 posts · 4 votes1mo
Quote from @Nicholas Floyd:
That’s exactly why I look at business funding as one piece of the overall capital strategy instead of a replacement for private or hard money. For the right borrower, a 0% APR business credit card for 12 months can be useful for rehab materials, operating expenses, carrying costs, or preserving cash reserves without paying interest during that introductory period. The important part is having the exit strategy figured out before using the capital. Ideally, the balance is paid down from the sale or refinance of the property before the 0% period expires. If the project runs longer, there should already be a backup plan—such as refinancing the balance into a lower-cost business line or term product if qualified—rather than letting it roll into a high-interest rate. I always look at the entire deal, expected timeline, cost of capital, and exit strategy before deciding whether business funding, private money, or a combination of both makes the most sense.
Absolutely, I agree. Looking at the entire capital stack and having a clear exit strategy is key. I like the idea of using different funding sources strategically rather than relying on just one. As long as the numbers and timeline make sense, combining business funding with private money can give investors more flexibility while preserving cash for unexpected costs or the next opportunity.
- 2wErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Hey Ron,
What are the biggest factors that make you comfortable or uncomfortable with a fix-and-flip deal?
I would say most lenders would feel comfortable with a transaction if there is nothing shady about it. Like for example the borrower has 2 months bank statements showing cash to close + reserves, borrower has a good credit score with no mortgage lates, LLC/Entity is not layered or has a hidden member, the transaction is straight forward, and there is a clear exit.
When there is something the borrower is hiding, that's when most lenders will decline a loan. (I.E. borrowing from an unsecured line of credit or undisclosed lender for cash to close, using another members credit just to obtain financing, or providing fake leases).
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