What Makes a Fix-and-Flip Project Fundable?

The Fix-and-Flip Lending Equation

Fix-and-flip lenders evaluate deals differently than rental property lenders. They focus on exit value, renovation feasibility, borrower experience, and speed of execution.

Strong ARV Spread

After-repair value (ARV) must justify the investment. Lenders want to see 20-30%+ profit margin after all costs to ensure viable exit.

Realistic Renovation Budget

Renovation scope must be clearly defined with detailed budget. Lenders want to see contractor bids and realistic timelines.

Borrower Experience

Track record matters. First-time flippers face more scrutiny and lower LTVs than experienced investors with proven exits.

Clear Exit Strategy

Lenders need confidence in your exit. Strong comps supporting ARV and realistic timeline for renovation and sale.

The 70% Rule and ARV Analysis

Most fix-and-flip investors use the 70% rule as a baseline: maximum purchase + renovation costs should not exceed 70% of ARV. This ensures adequate profit margin.

Example Deal Structure

ARV: $300,000 (supported by comps)

Max All-In Cost (70% rule): $210,000

Purchase Price: $180,000

Renovation Budget: $30,000

Total Investment: $210,000

Expected Profit: $90,000 (minus holding costs, fees)

This deal meets the 70% rule and shows strong profit potential.

What Lenders Analyze

Purchase Price vs Comps

Are you paying a fair price relative to distressed comps? Overpaying at acquisition destroys the deal before it starts.

ARV Support

ARV must be supported by recent sales of comparable renovated properties. Wishful thinking doesn't count.

Renovation Scope

Detailed scope of work with line-item budget. Lenders want to see you've thought through the project thoroughly.

Timeline Feasibility

Can renovations be completed in 4-6 months? Longer projects increase risk and holding costs.

Market Conditions

Is the market appreciating, stable, or declining? Days on market for similar homes? Lenders avoid weak markets.

Experience Requirements

Borrower experience directly impacts loan terms:

First flip: Lower LTV (65-70%), higher scrutiny, may require contractor oversight
2-5 successful flips: Standard terms, 75-80% LTV available
Experienced (5+ flips): Best terms, up to 90% LTV on purchase + 100% of rehab costs

Red Flags That Kill Fix-and-Flip Deals

• Profit margin under 15% after all costs
• ARV not supported by solid comps
• Overly aggressive renovation timeline
• Vague or incomplete renovation budget
• First-timer with complex structural renovation
• Market showing signs of weakness or oversupply
• Insufficient reserves for unexpected costs
• Title issues or zoning complications

Maximizing Approval Odds

Provide detailed scope of work with contractor bids
Show strong ARV support with multiple comps
Demonstrate conservative profit margin (25%+)
Have adequate reserves for cost overruns
Present past successful flip projects (if applicable)
Work with experienced contractors with references
Show clear exit strategy with market data

Conservative Underwriting Wins

The best flippers underwrite conservatively. They build in buffers for renovation overruns, longer timelines, and potential market softness. This approach not only secures lender approval but also protects profit margins when reality doesn't match projections.

What Makes a Fix and Flip Deal Fundable?