Start with the project economics
Investor lenders commonly review the acquisition basis, current value, renovation budget and estimated value after the planned work. Loan-to-cost, loan-to-value and after-repair-value limits are lender-specific and can affect both the initial advance and available renovation funds.
- Purchase contract or current payoff
- Scope of work and line-item renovation budget
- As-is and proposed after-repair value
- Borrower contribution and liquidity
- Timeline, holding costs and contingency funds
Understand renovation draws
When rehabilitation funds are included, they may be held back and released through a draw process after required work, inspections or documentation. Borrowers should understand whether work must be completed before reimbursement and how draw timing affects contractor payments and project cash flow.
Experience, property and liquidity are reviewed
Lenders may consider prior projects, credit, reserves, entity structure, property condition, title, insurance, permits and the capacity to complete the work. First-time investors may have different leverage, pricing or documentation requirements than experienced operators.
The exit strategy is part of underwriting
A short-term loan needs a realistic repayment path. A sale, DSCR refinance, conventional investor refinance or other takeout may depend on completed work, seasoning, stabilized rent, appraisal support and the borrower’s ability to qualify when the bridge term ends.
Common questions
Frequently asked questions
What is the difference between a fix-and-flip loan and a bridge loan?
A fix-and-flip loan commonly includes an acquisition or refinance component plus eligible renovation funds. A bridge loan may provide short-term financing without a renovation holdback. Structures vary by lender.
Can renovation costs be included in a fix-and-flip loan?
Some programs finance an eligible portion of the renovation budget through controlled draws. The borrower may still need funds for the initial contribution, deposits, carrying costs and work performed before reimbursement.
What is after-repair value?
After-repair value is an appraiser-supported estimate of the property’s value after the proposed work is completed. Lenders may use it with current value and total cost when setting leverage limits.
Can a bridge loan be refinanced into a DSCR loan?
An eligible stabilized rental may be able to refinance into a DSCR or other long-term investor loan. Completion, value, rent, seasoning, credit, reserves and lender requirements still apply.