📑 Guide 1: The Fix & Flip Loan Process (Short-Term Bridge)
Best for investors looking to buy, renovate, and quickly sell a property.
🛠️ Phase 1: Property Contract & Submission
- Find a non-owner-occupied investment property.
- Execute a purchase contract* with the seller.
- Submit your loan application along with the contract and a preliminary renovation plan.
- *Pro Tip: Include an extension clause in case unforeseen circumstances delay closing past 30 days, and keep the seller updated on progress.
📑 Phase 2: Underwriting & Entity Verification
- Submit your 2 most recent bank statements to prove liquidity for the down payment and required reserves.
- Provide business entity paperwork (LLC Articles of Organization or Corporate Articles).
- Note: Hard money loans are issued to business entities, not individuals, to meet state regulations and lender guidelines.
- Submit a basic credit report and an Investment Experience resume (🔽Track Record🔽) documenting past projects.
📐 Phase 3: Property Valuation & Project Vetting
- The lender reviews your itemized Scope of Work (🔽SOW🔽) and contractor credentials (licensing, insurance, workman's comp).
- Pro Tip: Estimate your repair costs high to cover unexpected plumbing or roofing overages (10% contingency).
- The lender orders a borrower-paid independent third-party appraisal or Broker Price Opinion (BPO).
- This appraisal calculates both the current "As-Is" value and the After Repaired Value (ARV).
💰 Phase 4: Loan Approval & Closing Costs
- Loans are structured as short-term, interest-only bridge loans (typically 12% APR / 1% per month).
- Funding is capped at a percentage of the ARV, usually covering 80% of purchase and 80-100% of rehab.
- At closing, you bring cash for your down payment and transactional closing fees.
- Lenders often escrow a 3-months interest reserve upfront from the loan proceeds.
🔨 Phase 5: Construction & The Draw Schedule
- Renovation funds are held in a secure escrow account, not given to you upfront.
- You fund the first phase of construction out of pocket or via contractor credit lines.
- Request a "draw" once a specific milestone (e.g., framing or drywall) is complete.
- The lender sends an inspector to verify the work and then reimburses you for those costs.
🚪 Phase 6: Property Payoff & Loan Exit
- These short-term loans typically feature a 6-to-12-month maturity date.
- You must execute your exit strategy before the loan expires to maximize profits.
- Pay off the principal by selling the finished home on the open market.
- Alternatively, pay it off by refinancing into a long-term loan if keeping it as a rental.