How Fix and Flip Loans Work (Start to Finish)
- TLPanic26
- Apr 13
- 4 min read
If you’re getting into real estate investing—or looking to scale—there’s one financing tool you need to understand:
👉 Fix and flip loans
These loans are built specifically for investors who want to buy, renovate, and resell properties for profit.
But here’s the reality:
Most investors don’t lose deals because they lack opportunity…They lose deals because they don’t fully understand how the financing works.
Let’s break it down—start to finish—so you know exactly what to expect.
What Is a Fix and Flip Loan?
A fix and flip loan is a short-term, asset-based loan designed to fund:
The purchase of a property
The renovation (rehab) costs
Sometimes even closing costs
These loans are typically:
6–18 month terms
Interest-only payments
Based primarily on the property’s value (ARV)
Underwritten primarily on your past flipping experience
👉 Not your tax returns or W-2 income.
Step 1: Identify the Deal
Before anything else, you need a solid deal.
That means understanding:
Purchase Price
Rehab Budget
After Repair Value (ARV)
Exit Strategy (sell or refinance)
💡 This is where most deals fall apart—bad numbers kill good opportunities.
Step 2: Get Your Deal Reviewed
This is where working with a broker like TiKi Funding gives you a major advantage.
Instead of guessing, we help you:
Validate your ARV
Determine your maximum allowable offer
Review your rehab budget
Structure the deal correctly
Determine your max loan amount
Determine your project profitability
With 15+ years of experience and $500MM+ funded, we know what lenders will—and won’t—accept.
Step 3: Understanding Loan Structure
Fix and flip loans are typically structured using:
🔹 Loan-to-Cost (LTC)*
Percentage of: Purchase price + Rehab budget. A lender may offer up to 90% LTC.
For example, a purchase price of $250,000 and a renovation budget of $75,000 =$325,000 total cost. If you qualify for 90% LTC, the loan amount would be $292,500, with $217,500 going towards the purchase price and $75,000 renovation budget held back in escrow for construction draws.
🔹 Loan-to-Value (LTV / ARV)*
Percentage of: Future value after renovations. A lender may offer up to 75% LTARV
Another calculation lenders use is LTARV - loan to after repair value. Using the example above, if the property were to be worth $450,000 after the renovations were completed, a lender may offer you up to 75% LTARV or $450,000 x 75% = $337,500 with $262,500 towards the purchase price and $75,000 renovation budget held back in escrow for construction draws.
*Note: Most lenders will look at both numbers - LTARV & LTC and will offer terms based on the lesser of the two loan amounts.
Step 4: Loan Approval & Term Sheet
Once your deal is structured, we send it to the right lenders.
You’ll receive a term sheet outlining:
Loan amount
Interest rate
Points (fees)
Term length
Draw structure
👉 This is where having a broker matters—because we can often create competition for better terms.
Step 5: Underwriting & Appraisal
After accepting terms, the lender will:
Order an appraisal or valuation
Review your scope of work
Verify your experience (if applicable)
Unlike banks, this process is:👉 Faster👉 More deal-focused👉 Less paperwork-heavy
Step 6: Closing (Usually 10–14 Days)
Once everything checks out:
Loan documents are finalized
Funds are wired
You officially close on the property
💥 Now the real work begins.
Step 7: Rehab & Draw Process
Rehab funds are typically held in escrow and released in stages.
This is called the draw process.
You:
Complete part of the renovation
Request a draw
Lender verifies work (inspection/photos)
Funds are released
👉 This keeps the project on track and protects both you and the lender.
Step 8: Sell or Refinance (Exit Strategy)
At the end of the project, you’ll either:
🏡 Sell the Property
Pay off the loan
Keep the profit
🔁 Refinance into a Rental Loan (DSCR)
Hold the property
Pull cash out
Build long-term wealth
👉 This is where smart investors really scale.
What Can Go Wrong (And How to Avoid It)
Let’s be real—fix and flip loans are powerful, but they’re not foolproof.
⚠️ Overestimating ARV
→ Leads to tighter margins or losses
⚠️ Underestimating Rehab
→ Kills your timeline and budget
⚠️ Choosing the Wrong Lender
→ Delays, bad terms, or deal fallout
Why Investors Work with TiKi Funding
At TiKi Funding, we don’t just get loans—we structure deals that close.
With:
15+ years experience
>$500MM+ funded
Access to a wide network of lenders
We help you:
Move fast
Avoid costly mistakes
Get the best possible terms
Let’s Look at Your Deal
Whether you’ve got a deal under contract—or just analyzing one—we’ll help you:
Break down the numbers
Structure the financing
Get you matched with the right lender
Book a discovery call with me today: https://api.leadconnectorhq.com/widget/bookings/newloans
📞 Call: (888) 844-1639📧 Email: info@tikifunding.com
Bottom Line
Fix and flip loans aren’t complicated…
👉 But doing them right is what separates profitable investors from the ones who struggle.
The difference?
Understanding the process—and having the right team behind you.
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