Buying a house to live in and buying one to renovate and resell are two different financing problems. A conventional 30-year loan is built for a long-term owner-occupant; it is a poor fit for a project you intend to be in and out of in months. Fix-and-flip financing exists for the second case. This is investment-property education; rates, products, and terms are illustrative and subject to change, and this is not a commitment to lend.
Purchase plus rehab in one loan
The defining feature of a rehab loan is that it finances both the acquisition and the renovation budget. Rather than buying with cash and scrambling for a renovation line later, you get a single short-term loan sized to cover the purchase and the planned improvements.
Sized off the after-repair value
Conventional loans size off the current value. Rehab loans typically size off the after-repair value — the ARV — which is what the property is projected to be worth once the renovation is complete. Lenders generally lend a percentage of that ARV and a percentage of the rehab budget, and they want to see comparable sales supporting the ARV, not just an optimistic spreadsheet.
Draws, not a lump sum
You usually do not receive the full renovation budget up front. Instead, the rehab funds are released in draws as work is completed and inspected. You front the cost of a phase, an inspection confirms it, and the lender reimburses the draw. This protects the lender and keeps the project honest, but it also means you need working capital to keep moving between draws.
Short, interest-only terms
These loans are short by design — frequently a matter of months — and often interest-only during the term, which keeps the monthly carry lower while you renovate. The exit is the sale of the finished property, or, if you decide to keep it as a rental, a refinance into a longer-term product such as a DSCR loan.
What makes a deal pencil
The numbers that matter are the purchase price, the realistic rehab budget (with a contingency, because there is always a surprise), the holding costs over the projected timeline, the selling costs, and a defensible ARV. If the spread between your all-in cost and the ARV does not leave room for profit after every cost and a margin for error, it is not a deal — it is a hope.
The Alliance take
We finance fix-and-flip projects across our Non-QM and investment lender panel, and the first thing we stress-test is the ARV and the contingency. Optimism on either is where flips lose money.
Have a project you are underwriting? Reach out and we will run the financing alongside your numbers.