Fix and Flip Loans: Your Ultimate Guide to Property Investing Success

Property flipping - the process of buying a rundown property and renovating it before reselling or renting - is an ever-popular property investment technique. 

Alongside experienced investors, it lures in novices, possibly prompted by the swathes of home improvement programs, but more likely, by the profit potential. A study of 1000 investors found that over 60% of flipped properties in the UK made £10-75k in profit¹. 

‘Fix and flip loans’ can facilitate the purchase and renovation costs to enable you to transform a dilapidated property, quickly. 

Read on to find out what is meant by fix and flip loans, how they work and tips for securing the best funding for your project. 

You can search and compare fix and flip loans on Brickflow’s bridging calculator at any time.

Fix and flip loans for beginners: what are fix and flip loans?

Essentially, fix and flip loans are bridging finance: short-term borrowing, quick to arrange and repaid in full, plus interest charges, at the end of the term. They are secured against the property being purchased or other collateral.

More specifically, fix and flip loans are refurbishment bridging finance, therefore refurbishment costs are also incorporated into the total loan.

Key features:

Whether it’s fix and flip loans for beginners, or seasoned investors, they’re a key tool for property projects.

The most common property flips are smaller scale, with completion timeframes of 3-6 months. Typically they don’t require planning permission, can be self-managed and involve only aesthetic renovations like:

• New bathroom or kitchen
• Altering internal layouts
• Installing new windows, central heating, roof renewal
• General redecoration

Fix and flip loans can also facilitate heavy refurbishments, such as projects requiring planning permission, Permitted Developments, property conversions, structural changes, loft/garage/basement conversions, or extensions. However, a development finance loan might be more suitable.

How do fix and flip loans work?

With fix and flip bridge loans, lenders provide the borrower with up to 75% of the property purchase price and up to 100% of the refurbishment costs.

The total interest charges are deducted from the gross loan, leaving the net loan available for the borrower. A deposit contribution is required to make up the remainder.

For large-scale refurbishments, lenders often appoint an independent surveyor (IMS) to monitor project progress and quality. The IMS checks the work regularly and releases funds in stages as milestones are met. If work falls behind schedule, the IMS can withhold funds until progress resumes.

As with any bridging loan, lenders are looking for a strong exit strategy. Ensure your resale value doesn’t breach the ceiling price for that type of property, or your expected rental yield is realistic for securing long-term buy-to-let finance.

If you default on the debt, the lender can repossess the asset(s) used as security.

Loan process

A typical loan process:

• Search and compare loan options: On Brickflow you can search & compare refurbishment loans from across the market, instantly

• Ensure your deal stacks: When you know your finance options, you can make sure your deal actually stacks and gives you the desired profit.

• Request initial terms:  Request a decision in Principle (DIP) from lenders

• Apply: If you’re happy with the loan offered and the proposed T&Cs, submit your full application to the lender. 

• Loan approval and drawdown: When your loan is approved, you can immediately access the funds.

Timeframes

With Brickflow, you can instantly search 50+ lenders to find the best fix and flip loans available, and receive multiple DIPs back within minutes.

Loan approval can be as quick as a few days for uncomplicated transactions with straightforward projects. It would require the lender to use an automated valuation model (AVM) and indemnity insurance instead of legal searches.

A more realistic timeframe for approval however is around two weeks. If the property you’re flipping will be your (or your family’s) home, lenders will arrange a regulated bridging loan - these can take 8 weeks or more to complete.

Eligibility criteria

To secure a fix and flip loan, there are certain eligibility criteria to meet. 

Basic requirements every borrower has to meet include:

• Aged 18 or over
• UK resident (there are limited bridging lender options for non-UK residents) 
• Employed/self-employed or retired
• Individuals, partnerships, LLPs, Limited companies, offshore companies, pension funds

Additional eligibility criteria for a refurbishment loan:

• Loan size: £25,000 - £100 million (lenders are more likely to engage for £150,000+)
  
  
• Loan-term: Typically 1 - 24 months; 12 months if regulated
  
  
• Property type: Residential, commercial and semi-commercial properties
  
  
• Security: Adequate collateral required
  
  
• Deposit: Any shortfall between the net loan and total costs involved is required in borrower equity contribution
  
  
• Exit strategy: A defined plan for repaying the loan is crucial, whether refinancing, selling or using funds from elsewhere (e.g. another asset sale)
  
  
• Valuation: Lenders instruct a valuation of the property to determine their lending parameters
  
  
• Good credit: Lenders focus on the exit strategy and assets, but good creditworthiness can support your application
  
  
• Experience:  First time fix and flip loans can be arranged, but it won’t hurt to demonstrate any property investment experience to lenders
  
  
• Other finances: If the refurbishment loan is the second charge, the primary loan payments must be up to date

Benefits of fix and flip loans

Some of the key benefits include:

• Fast: Loan completion typically takes around 2 weeks, but in some circumstances it can be as quick as a few days.
  
  
• Flexible: Can be secured against commercial or residential property renovations; lenders accept borrowers with poor credit; open-ended repayment (multiple viable exits can be used; no fixed date, only a maximum term); ability to negotiate on rates, fees, eligibility and loan covenants via your broker.

• No early repayment charges: They can exits, but are less common in bridging loans

• Rolled-up interest: Paid in full at the end of the term, so can be accessed by borrowers with low monthly income.

• Creates market opportunities: Buying at auction, buying unmortgageable properties or acting as a ‘cash buyer’ to secure a sale faster.

• Borrow more: As well as part funding the property purchase, lenders can offer up to 100% of the refurb costs, unlike a residential mortgage.

• Can be regulated: To facilitate the purchase and renovation of your next home whilst offering protection from Financial Conduct Authority.

Risks of fix and flip loans

Alongside the benefits of fix and flip loans, there are some downsides to be aware of:

• Higher costs: Typically have higher rates and fees than longer-term borrowing, such as buy-to-let mortgages. If interest is added to the loan and paid on redemption, it’s compounded - i.e. you pay interest on the interest.

• Limited timeframes: If you don’t achieve your exit plan within the agreed term of the fix and flip loan, default interest rate can be high if you don't agree an extension.

• Asset secured: The lender can repossess securing assets in the event of a default, or realise any personal guarantees required if borrowing through a corporate entity.

Read more in the pros and cons of bridging loans.

Tips for managing and reducing risks:

It’s well known that property projects can fail, but there are some simple measures to help you mitigate risks from the outset. 

Firstly, carry out thorough market research - don’t guess market values and don’t expect a quick sale of a 4-bed house in an area in desperate need of 1 bed flats. For renovation work, obtain several quotes, do detailed material costings and don’t forget to add in contingency. 

Equally crucial is to check your finance before committing to any property deal, and avoid the common pitfall of underestimating finance costs, therefore overestimating profits and overpaying for the property.

(Brickflow’s bridging loan calculator offers you comprehensive due diligence for your finance in under 60 seconds.)

Tips for securing fix and flip loans

Bridging loan lenders want to lend - the more loans on their books, the better business is. But only if they’re confident that your project is viable, and there is sufficient demand for that property type.

Here are some tips to help your application stand out to lenders and secure your fix and flip loan.

Preparation steps

Model your deal: After completing your market research and project costings, model your deal against live loan options to see if it is viable. It takes seconds to run your numbers through Brickflow's live bridging comparison tool – if your deal doesn’t stack on Brickflow, it won’t go anywhere with lenders.

Prepare your application paperwork: When you’re sure your deal stacks, gather your documents and prepare a detailed project presentation. Include market research, renovation costs and timelines, and your CV with relevant property experience.

Present a viable exit strategy: Resale or refinancing is the essence of property flipping, so exit strategies tend to be clear in fix and flip loans, but having back-up exits such as sale of another asset can help your application.

Build a strong lender relationship: That means being upfront about credit issues, maintaining good communication and responding quickly to lender requests.

Negotiating favourable terms

Using a specialist bridging loan broker can help you secure the best loan for your circumstances. 

They’re in the market daily, fostering lender relationships, learning tricks to get deals over the line and negotiating with lenders on your behalf to secure the most favourable terms.

Brokers using Brickflow can search loans from over 50 bridging lenders, instantly to help you secure better rates or bigger loans to reduce your equity input.

We’re happy to connect you with any of our broker partners, who can quickly find the best-fit solution for you, ensuring you work with the right lender to meet your criteria.

Alternatively, you can introduce your own broker to Brickflow.

There are also some things you can do to de-risk the loan to lenders and potentially agree better terms:

• Shore up your exit by having a DIP in place for refinance, or a pre-sale contract in place.
• Agree to a lower LTV- typically lenders offer better rates when borrows contribute 40% or more in deposit.

Alternatives to fix and flip loans

Alternatives to fix and flip loans include:

• Development finance: Suited for large-scale property development, including property conversion, ground-up construction or heavy refurbishment of commercial or residential properties.
  • Pros: Can potentially secure a larger loan; paid in stages to ensure adequate cashflow throughout the build.
  • Cons: Can take longer to arrange and is a more involved application process.
    
    
• Bridging finance: As well as refurbishment bridging there are other bridging loan types, such purchase bridging and auction finance, planning bridging, large bridging loans and more.
  • Pros: Flexibility, fast to arrange, facilitate a range of transactions
  • Cons: Might not cover the cost of the refurbishment work, whereas a fix and flip bridge can

• Commercial mortgages: For purchasing or refinancing a commercial property, on a longer-term basis. The debt is paid monthly plus interest over a period of up to 30 years.
  • Pros: Small manageable monthly payments
  • Cons: You’ll pay more interest in the long run compared to short-term borrowing.

• Residential mortgage: To purchase a property you intend to live in. If the property is uninhabitable, securing a residential mortgage might not be possible.
  
  
• Self-build mortgage: Financing specifically for constructing your own home.
  
  
• Buy-to-let mortgage: To purchase a property you intend to rent out - like residential mortgages, the property needs to be deemed habitable.

How Brickflow Can Help

Brickflow’s live bridging loan comparison tool is the quickest, easiest and most accurate way to compare and secure refurbishment bridging finance from across the market.

Here’s how it works:

• It takes seconds to enter your property details and search loans from banks, challenger banks, non-banks and specialist bridging lenders.
• Instantly find out how much you can borrow and how much it will cost.

• Compare LTVs, rates, fees, deposit input and more.
• Filter and sort your results, then shortlist your preferred loans.
• Adjust your figures if needed, save your search and log back in later.

• Get multiple DIPs (decision in principle) back within minutes
• Apply using Brickflow’s Smart Appraisal™, the only online tool that directly connects with lenders.
• Send the same application to multiple lenders and avoid repetitive form-filling.