What Lenders Look for in a Fix and Flip Deal
If you've ever submitted a fix and flip deal to a lender and heard nothing back — or worse, got a quick "no" with no explanation — you're not alone. Most real estate investors, especially newer ones, don't fully understand what hard money lenders are actually evaluating when they review a deal. It's not just about credit scores or how long you've been investing. Lenders are underwriting the deal itself, and there's a specific framework they use to decide whether to fund it.
At Dominion Hard Money, we review fix and flip deals every day. Here's exactly what we're looking at — and what you need to nail to get your loan approved and funded fast.
1. The After Repair Value (ARV) — Everything Starts Here
The single most important number in any fix and flip deal is the After Repair Value — the projected market value of the property once renovations are complete. Hard money lenders don't care as much about what you're paying for the property as they care about what it's going to be worth when the work is done.
Most lenders — including us — will fund up to 70% of the ARV. That's the industry-standard 70% ARV rule. So if a property has an ARV of $300,000, the maximum total loan (purchase price plus rehab budget) should land around $210,000 or less.
Your ARV needs to be defensible. That means backed by real, recent comparable sales — ideally within a mile and sold in the last 90 days. If your comps are weak, outdated, or cherry-picked, an experienced lender will catch it. Come to the table with solid data, and you'll build credibility immediately.
2. The Purchase Price and Your Entry Point
Buying right is the foundation of a profitable flip. Lenders know this, which is why your purchase price relative to ARV is scrutinized closely. If you're overpaying for the property, there's not enough margin to cover renovation costs, carrying costs, closing costs, and still leave a profit — and that makes your loan riskier.
A good rule of thumb: your all-in cost (purchase + rehab) should be no more than 65–70% of ARV. The tighter that number, the more comfortable a lender will feel. When investors push that ceiling, it signals either inexperience or a deal that simply doesn't work.
If you found the deal off-market, locked it up under contract quickly, or have a clear reason why you're getting it below market, tell your lender. Context matters. A strong entry point tells us you know how to find deals — and that you understand the numbers.
3. The Rehab Scope and Budget
Renovation estimates are where a lot of deals fall apart. Lenders have seen hundreds — sometimes thousands — of projects, and we know when a rehab budget is unrealistically low or vaguely defined. Submitting a deal with a "$40K rehab" and no breakdown is a red flag.
What lenders want to see is a detailed, itemized scope of work. Roof, HVAC, plumbing, electrical, kitchen, baths, flooring, paint — every line item should be accounted for with a realistic cost. Ideally, you've walked the property and either pulled your own contractor bids or have enough experience to estimate accurately.
We also pay attention to the type of rehab. Cosmetic flips — paint, flooring, fixtures — are lower risk than full gut renovations. If you're tackling a heavy rehab, make sure your timeline and budget reflect that reality. Experienced investors build in a 10–15% contingency buffer. That tells lenders you've done this before and you're not pretending everything will go perfectly.
4. Your Experience and Track Record
Hard money lenders are not just funding a property — they're funding you. Your experience level plays a direct role in how a lender evaluates risk and structures your loan.
Seasoned flippers with multiple completed projects often get better rates, higher leverage, and faster approvals. If you're newer to fix and flip investing, that doesn't mean you can't get funded — it just means other parts of your deal need to be stronger. A bulletproof deal with a low purchase price, conservative rehab budget, and solid ARV can often overcome a thin track record.
Be upfront about your experience. If you've done three flips, say so. If this is your first one, own it — and show that you've got a reliable contractor lined up, you've run the numbers conservatively, and you understand the process. Lenders respect honesty. What they don't respect is someone who overstates experience and then struggles to execute.
5. The Exit Strategy
Fix and flip loans are short-term — typically 6 to 12 months. Lenders need to know how you plan to pay the loan back. Your exit strategy needs to be realistic and clearly thought out.
For most flips, the exit is simple: renovate, list, sell, and pay off the loan at closing. But lenders will ask: How liquid is that market? How long are homes sitting before they sell? Is your ARV based on actual buyer demand, or hopeful thinking?
If your backup exit is to refinance into a rental (BRRRR strategy), be prepared to show that the numbers work for that scenario too — including what the property would rent for and what a conventional or DSCR refinance might look like at the ARV.
Lenders aren't trying to trap you — they want to see that you've thought through multiple outcomes, not just the best-case scenario.
6. Liquidity and Skin in the Game
Hard money lenders are not 100% financing sources (in most cases). You'll typically need to bring some of your own capital to the table — whether that's a down payment, a portion of the rehab costs, or both. This is what lenders call "skin in the game."
When you have your own money at risk, you're more invested in executing properly. It aligns your incentives with the lender's. If you're putting nothing in and borrowing everything, the risk profile shifts dramatically — and most lenders will pass.
Beyond the deal itself, lenders will typically want to see that you have reserves. If carrying costs run longer than expected or a surprise cost comes up mid-renovation, do you have the liquidity to keep the project moving? Investors who run out of money mid-flip are every lender's nightmare scenario.
The Bottom Line: Present a Deal That Works, Not a Deal You Hope Works
The investors who get approved quickly and build long-term relationships with lenders are the ones who come prepared. They know their ARV cold, they've walked the property, their rehab scope is detailed, and they can explain their exit clearly. They don't over-promise or pad numbers to make a deal look better than it is.
Fix and flip lending is a partnership. A good hard money lender wants to fund your deal — we make money when you close, not when we turn you down. But we need the fundamentals to be there. When they are, we move fast.
Whether you're an experienced investor or you're analyzing your first flip, understand that every deal gets evaluated on the same core criteria: ARV, purchase price, rehab scope, exit strategy, your experience, and your liquidity. Nail those six things, and your approval process becomes a conversation instead of an interrogation.