The fix-and-flip strategy remains a popular avenue for real estate investment in California, but success relies heavily on securing the right financing. Proper capital structure ensures that investors have the funds needed for both acquisition and renovation without over-leveraging the project.
Acquisition and Rehab Funding
Fix-and-flip loans are specialized short-term products that provide capital based on the property’s After Repair Value (ARV). Lenders typically fund a percentage of the purchase price and 100% of the renovation costs, releasing the rehab funds in draws as work is completed and inspected.
Managing Costs and Timelines
Because these loans carry higher interest rates than conventional mortgages, managing the project timeline is crucial. Delays in construction or permitting directly impact the bottom line. Investors must carefully balance the cost of capital against the projected ARV to ensure the project yields a strong return on investment.
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