Starting your first fix and flip project can be a challenge as a beginner real estate investor. Access to reliable information, resources, and the right partners is essential to make your first investment a success. This guide will walk you through finding a lender, analyzing a profitable fix and flip project, navigating the loan process, and getting pre-approved for your first fix and flip loan.

What Is a Fix and Flip Loan?

If you're new to the fix and flip business, you've likely heard terms like hard money loan, bridge loan, or rehab loan, and wondered, "What's the difference?"

In essence, these are all variations of the same concept: a short-term, interest-only loan designed to help real estate investors acquire, renovate, and resell a property for a profit within a limited timeframe—typically 6 to 12 months.

A fix and flip loan usually includes an initial advance for property acquisition, along with a rehab holdback to finance renovations. Approval is based on two main factors:

1. Profitability of the Project: Most lenders require a clear path to profitability within 6-12 months.
2. Creditworthiness: While fix and flip loans are largely asset-based, most lenders prefer a credit score of at least 660 for beginners, demonstrating a solid history of paying back creditors.

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How to Get a Fix and Flip Loan as a Beginner

Securing a fix and flip loan involves three main steps: Research, Pre-Approval, and Terms.

1. Research: Identify the type of project you want to pursue—single-family or multifamily, residential or commercial, specific price points, and the extent of rehab required. When evaluating lenders, ask if they work with first-time investors. Some lenders only work with experienced flippers, so it’s essential to find one willing to support beginners.
2. Ridge Street Capital has a long-standing commitment to helping first-time investors. We pride ourselves on supporting new entrepreneurs as they build their real estate portfolios. Schedule a call with a member of our lending team to explore your options.
3. Pre-Approval: A reputable lender will pre-approve you for financing before you start making offers, allowing you to include a pre-approval letter with your property offers. At Ridge Street, we offer online pre-approvals with letters ready within 24 hours.
4. Term Sheet: When you're ready to make an offer on a property, your lender will provide a term sheet detailing the loan terms. This document includes the loan amount, initial advance, rehab holdback, interest rate, and fees. With Ridge Street, submit your deal specifics online through our Quick App, and we’ll have a term sheet ready within two business hours.

Fix and Flip Loan Terms for Beginners

For first-time investors, fix and flip loans generally cover 75-80% of the property purchase price as an initial advance, plus 100% of the rehab budget as a holdback. Rates typically range from 10.75% to 11.99% with closing costs of 2-3%. While some lenders, like Ridge Street, can close in as little as 7 days, standard closing times are usually 2-3 weeks.

Process for Getting a Fix and Flip Loan

Once you've received a term sheet, the next steps include ordering an appraisal, gathering necessary documents, and coordinating with a title company to finalize closing. For a detailed breakdown, see our Fix and Flip Loan Guide and download our Fix and Flip Process Visualization.

Planning Your First Fix and Flip Project

1. Analyze Your Project’s Potential: Use a fix and flip calculator to estimate the potential profit of your project.
2. Get a Term Sheet: Request a term sheet from a pre-approved lender.
3. Secure Your Contract: Once an offer is accepted, ensure a 10-day inspection period.
4. Obtain a Contractor’s Quote: Use the inspection period to gather a detailed renovation quote from a licensed general contractor.
5. Finalize Financing: Once your rehab budget aligns with projected profits, confirm with your lender that you’re ready to close.

About Ridge Street Capital

Ridge Street Capital provides investment property financing for fix and flips and rental properties across 35 states. Specializing in working with beginners, we offer tailored financing solutions along with industry-leading guidance to set you up for success in your first investment project.

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