What a Fix and Flip Loan Pays For, and What It Does Not

A fix and flip loan typically covers part of the purchase price and most or all of the approved renovation budget. Some lenders also roll in closing costs or set aside an interest reserve. Many other costs, from utilities to selling fees, are on you.

Usually financed

A share of the purchase price. The lender funds a percentage of the price based on its leverage limits. You cover the rest as your down payment.

The renovation budget. Most flip loans include rehab money, based on a line-item scope of work. The lender keeps it in a holdback and pays it out in stages after each phase passes inspection. A good budget covers labor, materials, mechanical and structural repairs, and any work that requires permits.

RSC Private Lending's Fix & Flip loans fund up to 95% LTV on the purchase price and up to 100% of the rehab budget, within limits of 95% of total cost and 75% of ARV.

Sometimes financed

Closing costs. Origination points, title and escrow, appraisal, legal and recording fees. Some lenders let you roll these into the loan if the deal has room under its leverage caps. Others want them paid in cash.

Interest reserve. A set-aside from loan proceeds that covers monthly interest for a period of time. It lowers your out-of-pocket carry during the rehab, but you are still borrowing that money and paying interest on it.

RSC Private Lending can build a full interest reserve into its Fix & Flip loans. With RSC, an appraisal or due-diligence fee may be due upfront, and most other costs are paid at closing.

Usually not financed

Plan to pay these yourself:

• Utilities and utility deposits
• Ongoing property taxes and insurance premiums after closing
• Staging, furniture and photography
• Real estate commissions and seller closing costs when you sell
• Your contingency, unless it is written into the approved budget

Run the full cash picture

Example (illustrative only):

• Purchase: $200,000, lender funds 85%, so you bring $30,000
• Rehab: $50,000, fully funded through draws
• Closing costs: $8,000, paid in cash
• Five months of interest and carry: $12,000
• Float for the first rehab phase before a draw: $10,000

Cash needed is about $60,000, double the down payment alone. That float comes back to you through the first draw, but you need it in hand on day one.

Ask for a breakdown

Before closing, ask your lender for a sources and uses statement showing exactly what the loan funds and what you bring. It removes guesswork and helps you avoid a cash crunch halfway through the job.

What this means for you

Do not plan around the down payment alone. Add closing costs, carry, a contingency and draw float. The investors who budget for everything are the ones who finish on time.

Want a clear picture of what your next loan would cover? Send RSC Private Lending your scenario for a term sheet in 24 hours. All loans are business-purpose and subject to underwriting.