Arizona Fix and Flip Loans

Interested in real estate investment but not sure where to begin? Though you’ll learn the most from gaining hands-on experience, there are a few things you should know before diving into the industry. In most cases, the best place to start is with getting funding for your properties.

Applying for Fix and Flip Loans

Though the application process for fix and flip loans may seem pretty straight forward, it is important to know how to improve your chances of receiving the loan, as well as a loan that is large enough to meet all of your needs. This will help to accelerate the borrowing process, allowing your lender to see that you are indeed a reliable buyer.

1. Create Your Business Plan

Lenders in Arizona for fix and flips tend to loan to borrowers that are rehabilitating properties that are in poor condition, so they expect to see how you intend to rehab the property, as well as how much it will cost. It is up to you to provide them with a thorough business plan detailing what exactly you will do with your loan.

This house flipping plan should include information for every property you are involved with. While it doesn’t need to be exceptionally lengthy, this plan should be a complete analysis of every property you are rehabbing.

Be sure to include the following information in your business plan:

  • The address of each property
  • An analysis of the surrounding neighborhoods
  • Sale prices of comparable homes
  • Your financial projections, timeline, and strategy for flipping
  • Background information for your team
  • A backup plan
  • An appraisal of the property’s current value and estimated value after renovations

A thorough business plan will allow lenders to see that you can be trusted with a loan. The details regarding the value of the property and the scope of the renovation will also ensure that the lender provides you with enough capital to cover your costs.

2. Estimate Renovation Costs Accurately

After going through the application process and receiving a loan for their flip, borrowers often realize that they didn’t ask for enough money. This sort of unfortunate situation can be avoided if the initial estimation is as accurate as possible. In order to get the correct estimation, flippers need to create their scope of work before they apply for the loan.

The scope of work details all the repairs necessary for the renovation, as well as the timeline, and cost of the entire rehabilitation. When creating your scope of work, get the assistance of a contractor and experienced appraiser. Both parties will go through the property analyzing the necessary expenses, as well as price estimations for comparable projects.

The appraiser and contractor will be able to create the quote cost based along a timeline (typically two to three months) to make sure that unknown contingencies are accounted for as well.

3. Include the LTV and ARV

This scope of work should be as comprehensive as possible before you decide to reach out to any lenders. The scope of work must include two important numbers to help the lender assess your need for a loan: the LTV and ARV.

  • LTV compares your loan size with the appraised value of your property. Fix and flips tend to have a maximum LTV of 90%.

    If you are working with a property worth $100,000, a lender providing 90% LTV will allow you to borrow $90,000. The remaining $10,000 must be provided as the down payment.

  • ARV is the appraiser’s estimate for your property once the renovations are complete.

    Lenders may quote the size of the loan with the ARV in mind. This type of lender might go up to 50% ARV, which will translate to A loan of $100,000 as the maximum for a home estimated at $200,000 once the repairs are finished.

Understanding everything that goes into the lending process will help you to get the loan you need to rehab your properties. Keep this information in mind the next time you contact a lender for a loan.

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Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

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