Step‑by‑Step Guide to Funding Your First Fix‑and‑Flip Project By Devency Capital, LLC

Fix‑and‑flip investing can be a powerful way to build wealth quickly, but it isn’t possible without the right financing. Cash offers tie up your savings and traditional bank loans often take too long, which makes private fix‑and‑flip loans a preferred choice for many investors. These short‑term loans are based more on the value of the property than on your personal credit and offer speed, flexibility and funding for purchase and renovations. If you’re preparing for your first flip, this guide will walk you through everything from evaluating a deal to closing your loan and completing renovations.

1. Understand Why Specialized Financing Matters

Before diving into the steps, it helps to know why fix‑and‑flip loans exist at all. Traditional mortgages aren’t designed for distressed properties. Banks may not lend on homes that need substantial repairs, and their underwriting process can take weeks. Private lenders focus on the asset’s after‑repair value (ARV) rather than current condition and can close within days. Fix‑and‑flip loans are typically six to eighteen months, interest‑only and based on a percentage of ARV, so they give you enough time to complete renovations and sell or refinance.

What Fix‑and‑Flip Loans Cover

• Purchase price of the property.

• Renovation budget for repairs and upgrades.

• Carrying costs such as insurance, utilities and taxes during the project.

• Short closing timeline so you can compete with cash buyers.

Because these loans are asset‑based, lenders look closely at your plan, budget and exit strategy rather than just your credit score. That’s why careful planning is essential.

2. Evaluate the Deal: Know Your Numbers

Your first step is to determine whether a property will be profitable. Start by calculating the After‑Repair Value (ARV)—what the property will sell for after renovations. To get an accurate ARV:

1. Find comparable sales (comps) in the neighborhood that have similar size, condition and features to the project you plan to create. Look at sales within the last three to six months to ensure you’re using current market data.

2. Adjust for differences in square footage, number of bedrooms/bathrooms, and upgrades. Real estate agents or online tools like MLS can help fine‑tune these adjustments.

3. Apply the 70% rule: many flippers aim to pay no more than 70% of the ARV minus repair costs. This gives a buffer for holding costs and profit.

After estimating the ARV, subtract all costs, including the purchase price, expected repairs, closing fees and carrying expenses. Don’t forget to add your target profit margin. If the numbers work, you’ve found a viable project.

Example Calculation

• ARV (after repair value): $300,000

• Max purchase + rehab budget using 70% rule: 70% × $300,000 = $210,000

• Estimate repairs: $50,000

• Maximum purchase price: $210,000 − $50,000 = $160,000

If you can purchase the property for $160,000 or less and stick to your budget, the project has room for profit. Otherwise, keep looking.

3. Prepare a Realistic Budget and Scope of Work

Once you’ve identified a property, create a detailed scope of work and budget. Undercutting your rehab costs can ruin profits, so be thorough. Consider:

• Repair costs: Walk through the property with contractors, inspect structural elements and major systems. Plan for items like foundation repairs, roofing, framing, plumbing, HVAC and electrical rough‑ins, which typically occur early in a renovation. Finish with cosmetic upgrades such as drywall, paint, flooring, fixtures and landscaping.

• Contingency: Set aside 10‑15% of the rehab budget for unexpected issues. Old wiring, hidden water damage and code requirements can quickly add up.

• Carrying costs: Include loan interest, utilities, insurance and property taxes during the renovation period.

• Permit and inspection fees: These vary by municipality and project type.

Tip: Don’t over‑renovate. High‑end finishes in a mid‑price neighborhood won’t provide additional return and will eat into your budget.

4. Identify the Right Lender and Loan Type

There are several ways to finance a flip: bank loans, hard money lenders, private individuals and partnerships. For most first‑time flippers, fix‑and‑flip loans through a private or hard money lender offer the right blend of speed and flexibility. Here’s what to look for:

• Speed of closing: Private lenders can close in days rather than weeks—crucial for auction properties or wholesale deals.

• Loan‑to‑value (LTV) / Loan‑to‑cost (LTC): Many lenders finance 70–90% of purchase and up to 100% of rehab. Check how much equity you need to contribute.

• Interest rate and fees: Expect higher rates than conventional mortgages, but compare multiple lenders to ensure fees are competitive.

• Experience requirements: Some lenders require previous flipping experience. If you’re new, consider partnering with an experienced investor or working with a lender that caters to beginners.

• Customer service and reputation: Build a relationship with your lender. A responsive lender can help troubleshoot issues and fund future deals faster.

Loan types:

• Fix‑and‑flip loan: Short‑term, interest‑only financing used to purchase and renovate the property; repaid upon sale or refinance.

• Bridge loan: Similar to a fix‑and‑flip loan but can be used when you need to purchase a new property before selling another.

• Line of credit: For investors with several projects, some lenders offer a line of credit secured by existing properties or equity.

Compare options and choose the best fit for your project and exit strategy.

5. Gather Documentation and Apply for Financing

After you’ve selected a lender, prepare your application. Most private lenders require:

• Purchase contract or proof of the deal (a signed purchase agreement or auction bid).

• Scope of work and detailed budget.

• ARV analysis with comps, showing how you arrived at your projected sale price.

• Contractor estimates or bids.

• Exit strategy (sell or refinance).

• Personal financial statement and, in some cases, previous project history.

Because private lenders focus primarily on the property and project plan, they might not demand extensive documentation. Still, organized paperwork builds credibility and accelerates the approval process.

Once you submit your package, an experienced fix‑and‑flip lender can issue a pre‑approval quickly—sometimes within 24 hours—and schedule an appraisal or property inspection shortly after.

6. Close the Loan and Start Renovations

Closing on a fix‑and‑flip loan is similar to closing on a conventional mortgage, but the timeline is shorter. Review the loan’s terms, verify the draw schedule (how rehab funds are released), and ensure you understand any fees or pre‑payment penalties. At closing, you’ll sign the promissory note, mortgage or deed of trust, and any personal guarantees required.

After closing, begin your project:

1. Secure permits and line up contractors.

2. Demolition and structural repairs: remove damaged elements, address foundation issues, and complete roofing.

3. Rough‑ins: plumbing, electrical and HVAC systems must be installed and inspected.

4. Framing and walls: repair or replace framing, install insulation and drywall.

5. Cosmetic finishes: paint, flooring, cabinets, countertops and fixtures complete the transformation.

Follow your budget closely and communicate regularly with contractors. Staying on schedule and within budget protects your profits.

7. Manage the Exit: Sell or Refinance

Once the renovation is complete, it’s time to realize your gains. Two common exit strategies:

• Sell the property: List and sell the house at or above your ARV. Work with an experienced agent who knows the market. A quick sale reduces holding costs and maximizes profit.

• Refinance into a long‑term loan (BRRRR strategy): If you want to keep the property as a rental, refinance into a conventional or DSCR rental loan. Doing so pays off the short‑term fix‑and‑flip loan and allows you to build long‑term wealth.

Whichever exit you choose, ensure that you account for closing costs, agent commissions and potential market shifts. Knowing your market and pricing the property appropriately helps you avoid extended holding periods.

Pro Tips for First‑Time Flippers

• Stick to the budget: It’s tempting to add upgrades, but every change order chips away at profits. Follow your original plan unless a necessary repair arises.

• Build a relationship with your lender: A good lender can provide guidance, additional funding for future deals and flexibility if challenges arise.

• Understand your local market: Overestimate values or misjudge buyer preferences and you could sit on the property longer than expected.

• Work with experienced professionals: Partner with reputable contractors, real estate agents and closing attorneys to avoid costly mistakes.

Conclusion: Funding Your First Flip with Confidence

Getting a fix‑and‑flip project off the ground doesn’t have to drain your savings or test your patience. By understanding how to evaluate deals, budgeting accurately, choosing the right lender and executing your plan, you can turn distressed properties into profitable investments. Fix‑and‑flip loans provide the speed and flexibility required to compete in today’s market, allowing you to act quickly and confidently. With proper due diligence and guidance from an experienced private lender, even first‑time investors can succeed.

If you’re ready to take the next step and need a financing partner you can trust, Devency Capital, LLC is here to help. Our team specializes in private money loans, fix‑and‑flip financing, rental loans and joint‑venture options for investors across the United States. We offer fast approvals, competitive terms and personalized support so you can focus on what you do best—finding and transforming properties. Contact us today to discuss your first fix‑and‑flip project and learn how we can fund your real estate vision.

Disclaimer: This article is for informational purposes only and does not constitute financial or legal advice. Real estate investing involves risk. Always perform your own due diligence, consult with qualified professionals and consider your personal financial situation before making investment decisions.