Fix-and-Flip Loans Covering Purchase + Rehab in One Closing

One of the most common questions new flippers ask: can I get a single loan that covers both the property purchase and the rehab budget? Yes, and it's actually the default fix-and-flip loan structure — you don't need two separate loans. This guide breaks down how the bundled loan works: how lenders size it, what draws look like, what ARV-based underwriting really means, and what the deal needs to look like for it to pencil. For broader context see fix and flip financing and the related fix-and-flip loan requirements.

How the Bundled Purchase + Rehab Loan Works

The mechanics:

• At close, the lender wires 85–90% of the purchase price to the seller. You bring 10–15% of the purchase price plus closing costs.
• Rehab budget sits in a lender-controlled escrow account. As work completes, you (or your contractor) submit a draw request with invoices and photos. The lender inspects (or accepts third-party inspection), then releases funds.
• Total loan amount = purchase financing + rehab budget. Sized to the lower of (a) 85–90% of purchase + 100% of rehab, or (b) 65–75% of ARV.
• Interest accrues on the outstanding loan balance. Some lenders charge interest only on funds drawn (cheaper for the borrower); others charge on the full committed amount including undrawn rehab (more expensive).
• Exit: Sell the rehabbed property or refinance into a long-term loan (DSCR rental loan, conventional mortgage). Term is 6–18 months so you have to land that exit.

Loan-to-Cost vs Loan-to-ARV: What Caps the Deal

Two sizing tests run in parallel. The lower of the two determines max loan size.

Loan-to-Cost (LTC) test

LTC = (purchase financing + rehab financing) / (purchase price + rehab budget). Most lenders cap LTC at 90%, meaning you need 10%+ of total project cost as equity.

Example: $200K purchase + $80K rehab = $280K total project. At 90% LTC, max loan = $252K. Your equity = $28K (10%) + closing costs + reserves.

Loan-to-ARV test

LTV-of-ARV = total loan / after-repair value. Most lenders cap at 65–75% of ARV.

Same example, ARV $375K. At 70% of ARV, max loan = $262K. LTC test allowed $252K; ARV test allowed $262K. The lower (LTC) wins, so max loan is $252K.

When ARV is the binding constraint — meaning ARV × 0.7 is less than 0.9 × (purchase + rehab) — the deal is tight. If max loan from the ARV test is below total project cost minus your minimum equity, you can't fund the deal as structured. You either need a higher ARV, a lower rehab budget, a cheaper purchase, or more buyer equity.

The Draw Schedule

Rehab funds release in milestone-based draws, not lump sum:

• Draw 1 (10–25% of rehab): Demo, structural, rough trades. Triggered by demo complete + framing or rough mechanicals inspection.
• Draw 2 (20–30%): HVAC, plumbing rough, electrical rough complete. Inspections passed.
• Draw 3 (20–30%): Drywall, paint primer, cabinet install, flooring underlayment.
• Draw 4 (15–25%): Trim, fixtures, appliance install, final mechanicals.
• Draw 5 (final 5–15%): Punch list, final inspection, certificate of occupancy if applicable. Held back until truly complete.

Cash-flow planning: you front each milestone with your own working capital and get reimbursed 5–15 business days after the draw request. Most flippers run on a $20K–$50K working capital line of credit just for the draw lag.

Rates, Points, and Total Cost

• Interest rate: 9–14% interest-only (no principal payments during the loan term)
• Origination points: 1–3% of loan amount, paid at close
• Closing costs: Lender legal, title, appraisal (both as-is + ARV), inspection fees. Typically 1–2% of loan amount.
• Servicing/draw fees: $150–$500 per draw (4–6 draws on a typical rehab)
• Exit fee: 0–1% paid at payoff (negotiable on stronger borrowers)
• Prepayment penalty: Usually none, or limited to a 3-month minimum interest payment

All-in cost on a $250K loan held 8 months at 11% IO + 2 points + $1.5K closing + $1K in draw fees: ~$20K total carry. Built into the deal underwriting before you sign.

Who Funds These Loans

• National fix-and-flip platforms: Kiavi (formerly LendingHome), RCN Capital, Anchor Loans, Lima One Capital, EasyKnock. Tech-forward, fast approval, standardized terms.
• Regional hard money lenders: Local-market specialty lenders who know your sub-markets. Often more flexible on borderline deals than national platforms.
• Private lenders / fund managers: Individuals or small funds writing checks. Highest rates but fastest close (5–7 days).
• Bridge lenders: Some commercial bridge lenders will fund 1–4 unit fix-and-flip if the deal is large enough ($500K+ loan).

Compare 3+ sources every time. Rate spread between best and worst on the same deal is typically 200–400 bps plus 0.5–1.5 points in origination.

Common Pitfalls That Kill Deals

• ARV underestimate — lender's ARV appraisal comes in below your projection. Fix: build the ARV haircut into your deal screening before you offer on the property.
• Rehab budget shaved — lender thinks your $80K budget for the kitchen and bath is high and approves $65K. You either fund the difference out-of-pocket or scale down the rehab.
• Draw delays during construction — inspector is slow, contractor needs to redo work, your file gets stuck in lender QC. Plan for 7–15 day draw cycles, not the 3–5 day best case.
• Exit timing — you don't sell or refi by month 12, and the loan goes into extension fees or default rate. Have a refinance lender lined up early as backup.
• Inexperienced contractor — first-time flipper using a new contractor who blows the budget and timeline. Build relationships before the deal.

Next Step

Get matched with fix-and-flip lenders who fund purchase + rehab in one closing. One application, offers from national platforms + regional hard money + private lenders. For related deep-dives see fix-and-flip loan requirements, typical fix-and-flip loan rates, and credit score for fix-and-flip loans.