Step 1: Run the Numbers Before You Offer
Before financing, the deal has to make sense. The standard formula:
Max Offer = (ARV × 70%) − Rehab Budget − Profit Target
If the property won't pencil, walk. Lenders won't fix a bad deal.
Step 2: Choose the Right Loan
- Fix & Flip loan — short-term rehab and resale (6–18 months).
- Bridge-to-DSCR — value-add rentals you'll hold long-term. See bridge loans for investors.
- Construction loan — ground-up builds or major structural rebuilds.
Step 3: Get Pre-Qualified
Before submitting offers, get a pre-qualification letter from your private lender. It signals to sellers and agents that you can actually close — and gives you a clear ceiling on what you can fund.
Step 4: Submit the Deal Package
- Purchase contract.
- Scope of work with line-item rehab budget.
- Comps supporting the ARV.
- Borrower docs: ID, credit auth, proof of liquidity.
Step 5: Close and Fund
On a clean file, expect 7–14 days to close. Purchase funds release at closing. The rehab budget sits in escrow as a holdback (see how fix & flip draws work).
Step 6: Manage Rehab Draws
Complete each phase, request a draw with photos, pass an inspection, and receive reimbursement within 24–72 hours. Plan working capital to cover at least one draw cycle out of pocket.
Step 7: Execute the Exit
- Sale: List once rehab is complete. Net proceeds pay off the loan.
- Refinance: Roll into a 30-year DSCR loan and hold the property as a rental. A cash-out refi can recover most of the initial capital.
Common Mistakes to Avoid
- Underestimating the rehab budget — always carry a 10–15% contingency.
- Ignoring carry costs (interest, taxes, insurance, utilities).
- Choosing a lender on rate alone instead of speed and certainty of close — see private money vs bank financing.