How Much Cash Do You Need for a Fix and Flip Loan?
You found a property, estimated the repairs, and believe there is room for a profit. Then comes the question that can decide whether you move forward: How much cash will you actually need?
The answer is rarely just the down payment. Even when a lender offers to finance the full renovation budget, you need to understand what is due at closing and when the rehab money becomes available.
Start with the purchase and rehab numbers
A fix and flip lender may calculate its loan using a percentage of the purchase price, the renovation budget, and the property’s expected value after repairs—known as the after repair value, or ARV. The lender will also review the property, your scope of work, and the proposed exit.
Consider this simplified example:
Purchase price: $150,000
Renovation budget: $50,000
Estimated ARV: $300,000
Illustrative financing: 90% of the purchase price plus 100% of the approved rehab budget, subject to the lender’s limits
At 90% of the purchase price, the purchase portion of the loan would be $135,000. That leaves a $15,000 purchase gap for the investor. The approved $50,000 rehab budget may also be included in the loan, but that does not necessarily mean you receive $50,000 at closing.
These are example numbers, not a loan offer. Actual funding depends on the lender’s review and final terms.
Plan for more than the purchase gap
Before committing to a deal, ask what you will need for each of these:
Closing costs and loan fees. Title charges, insurance, lender fees, broker fees, and other transaction costs can add to your cash to close.
The first phase of construction. Many lenders hold renovation funds and release them through draws as work is completed and verified. You may need cash or contractor arrangements to get the work started before receiving a draw.
Reserves and unexpected repairs. A roof, plumbing, or electrical issue can change the budget quickly. You also need to carry the property while it is being renovated and sold.
A change in the lender’s value or scope. If the supported ARV comes in lower than expected, or the approved rehab budget changes, the loan amount and your required cash could change too.
“100% rehab financing” still requires a cash plan
When you hear that a loan covers 100% of rehab, ask how and when those funds are released. Find out whether draws reimburse completed work, what documentation is required, and how long a draw typically takes.
That timing matters. A deal can have a workable projected profit and still run into trouble if there is no plan to pay contractors between draws.
What should you have ready for a fix and flip loan?
Before requesting terms, gather the property address, purchase price or contract, renovation scope and budget, estimated ARV with supporting comparable sales, your planned exit, and the funds you have available for closing and the early stages of the project.
The most useful question is not simply, “Can I get 100% financing?” It is: “Based on this property and this renovation plan, how much cash will I need at closing and during the project?”
At Headache Property Relief, we can review those numbers with you and help identify where the funding structure may leave a gap. If you have a property under contract—or one you are considering—call or text 762.222.1067 or email christian@headacheproperty.com with the details. Let’s look at the deal before you commit to numbers that may not work.
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