Buying a worn-out house, fixing it up, and selling it sounds simple. In practice, financing and planning decide whether a flip works. This first post in our series on real estate investing options explains how fix-and-flip financing generally works and what investors plan for.

What is a fix-and-flip loan?

A fix-and-flip loan is short-term financing for an investor who plans to buy a property, renovate it, and resell it. These loans are often offered by private or "hard money" lenders instead of banks. They tend to focus on the deal, including the property's value after repairs, as well as the borrower's experience. Terms, rates, fees, and down payments vary widely by lender, and approval is never guaranteed.

How the funding typically works

Every lender structures things differently, but many fix-and-flip loans follow this pattern:

• Purchase funds. The lender finances part of the purchase price. You bring the rest as a down payment.

• Rehab funds. Some lenders also finance part of the renovation budget, often released in stages (draws) after work is completed and checked.

• Short term. The loan is usually meant to be repaid when the property is sold or refinanced, not held for years.

• Payments. Some loans are interest-only. Ask how interest, points, and fees are calculated.

Run the numbers before you buy

A basic flip budget includes:

1. After-repair value (ARV). What the home should sell for once the work is done, based on recent comparable sales.

2. Purchase price and closing costs.

3. Rehab budget, with a contingency cushion.

4. Holding costs, such as loan interest, insurance, utilities, and property taxes.

5. Selling costs, such as agent commissions and closing costs.

6. Financing costs, including lender fees and points.

Many investors use the "70% rule" as a quick screen: the maximum purchase price is about 70% of ARV minus repair costs. It is a rule of thumb, not a lender requirement. In a hypothetical example, a $300,000 ARV and $40,000 of repairs would screen at $170,000 (70% of $300,000 is $210,000, less $40,000).

What the national data says

ATTOM's Q2 2026 home flipping report found that the typical flip had a gross profit of $60,526 and a 21.5% gross return on investment, down from 27.6% a year earlier. ATTOM notes those figures do not include rehab costs and other expenses, which flipping veterans estimate run 20% to 33% of the after-repair value. The report put the typical time from purchase to resale at 161 days. Source: ATTOM. Results vary by market.

Planning for the risks

Like any renovation project, a flip can run over budget or take longer than planned, and profit is never guaranteed. Most investors plan for a few common issues:

• Cost overruns and delays. Get a thorough inspection, collect more than one contractor bid, and keep a contingency reserve. Delays also add holding costs such as interest, taxes, and insurance, so build a realistic timeline.

• Market changes. Use conservative comparable sales and have a backup plan, such as renting the property.

• Contractors. Use written contracts, verify licenses and insurance, and tie payments to completed work.

• Liability. Carry adequate insurance. Some investors hold each project in an LLC or corporation to help separate personal and business assets, but an entity does not remove risk, and lenders often require personal guarantees. Have an attorney and a CPA review your structure and contracts.

Permits, licensing, and local rules vary

Permits, contractor licensing, disclosure rules, and lending regulations differ by state, county, and city. Skipping required permits can delay a sale or create liability. Check with your local building department and your own attorney before you finalize your budget and timeline.

What lenders typically want to see

• The property address and purchase contract

• A scope of work and rehab budget

• Your estimate of ARV, plus comparable sales

• Your experience, if any

• Proof of funds for the down payment and reserves

• Borrower and entity documents

Common questions

• How do I find a property? Investors commonly look at foreclosure and auction listings, the MLS through an agent, off-market leads from direct mail or networking, and wholesalers. Whatever the source, run the numbers before you make an offer.

• How do I get a property under contract? You submit a written purchase offer, and the seller accepts it. Many investors make the offer contingent on inspection and financing, and have an attorney or title company review the contract.

• When should I line up financing? Before you make offers. Having a lender conversation and your documents ready can make an offer stronger and help you close on time.

• How do I estimate the rehab budget? Walk the property with a contractor, get written bids, and itemize the work. Then add a contingency reserve for surprises.

• How do I estimate the after-repair value (ARV)? Compare recent sales of similar, renovated homes nearby, usually with help from a local agent or appraiser, and stay conservative.

• What happens at closing and after? The title company handles closing, and rehab funds are often released in stages as work is completed. Once the renovation is done, you sell or refinance to pay off the loan.

Next steps

Have a deal in mind? Submit your real estate deal for review, or learn more on our real estate investment page. Next week, we compare private and hard money loans with traditional bank financing.

Disclaimer: Call 4 Capital is a business funding broker, not a lender. This article is for educational purposes only and is not financial, tax, or legal advice. Laws and rules vary by state, so consult your own attorney and CPA. Loan approval, amounts, and terms depend on lender underwriting and are not guaranteed. Availability varies by state and lender. Real estate investing involves risk, including loss of principal.