A Richmond, Virginia investor contracts a dated three-bedroom ranch for $300,000, budgets $70,000 for renovations, and targets a $465,000 resale. This flip funding example uses a $270,000 purchase loan, equal to 90% of purchase price, plus 100% of the documented $70,000 rehab budget through controlled draws. Total financed exposure is $340,000. If the project sells in five months for $465,000, the investor has a projected gross spread of $125,000 before carrying costs, selling expenses, and financing charges. At a modeled $2,250 monthly interest payment, five months of debt service totals $11,250. Add $8,500 in points and closing costs plus $31,000 in sales costs, and the projected pre-tax profit is $74,250. Over five similar projects in five years, that pace could produce $371,250 in pre-tax project profit, assuming the same execution, resale demand, and budget control.
Duane Buziak, NMLS #1110647
Table of Contents
- What the numbers mean in a flip funding example
- How purchase, rehab, and after-repair value work together
- Leverage versus rate tradeoffs
- How to protect the exit before closing
- Flip funding questions investors ask
What This Flip Funding Example Actually Shows
Fix-and-flip financing is not a conventional mortgage with a fresh coat of paint. The underwriting conversation centers on the property, the scope, the investor’s experience, liquidity, credit profile, and the exit. For a business-purpose project, the broker is matching a deal to wholesale investor guidelines, not forcing every borrower into one bank’s single box.
In the Richmond example, the $465,000 after-repair value, or ARV, is the number that determines whether leverage works. The $340,000 total loan exposure equals 73.1% of ARV. That is inside a common 75% ARV ceiling for experienced operators, while newer flippers may see 65% to 70% ARV limits, larger down payments, lower rehab advances, or stronger reserve requirements.
The investor brings the 10% purchase down payment of $30,000, plus closing costs and reserves. If the program requires six months of interest reserves, that is $13,500 at the modeled payment. Real cash to close might land near $52,000 before any seller credits or financed points. That is the figure to underwrite, not the headline promise of 90% purchase financing.
The deal math, line by line
Purchase price is $300,000. Renovation budget is $70,000. Initial purchase funding is $270,000. The rehab budget is released in draws after inspections, so the borrower does not receive all $70,000 on day one. If demolition, rough-in, cabinets, flooring, paint, and final punch are divided into five draws, the project must show completed work before the next release.
That draw process protects the capital source, but it also exposes weak contractors. A contractor who misses a two-week cabinet delivery can turn a five-month plan into seven months. Two extra months at $2,250 monthly interest adds $4,500 before utilities, insurance, lawn care, and property taxes. A flip survives or fails in those ordinary details.
Local resale evidence matters as much as the renovation budget. An investor should support the $465,000 ARV with three to five recent renovated comparable sales, ideally within one mile and six months where the market allows. If the closest renovated sales are $450,000, $458,000, and $462,000, using $465,000 may be defendable only if the subject has superior square footage, lot size, layout, or finishes. A $15,000 lower appraisal can eliminate much of the margin.
How a Broker Builds the Right Capital Stack
Investors Paradise evaluates the project from both directions: acquisition and exit. The acquisition side asks whether purchase price, scope, experience, and liquidity fit the fix-and-flip program. The exit side asks whether resale is credible and whether a DSCR loan can refinance the property if the investor chooses to hold it instead.
That second exit matters. If the Richmond property rents for $3,450 per month after renovation and the new DSCR loan payment is $2,700 per month including principal, interest, taxes, insurance, and association dues, the debt service coverage ratio is 1.28. The math is $3,450 divided by $2,700. Many DSCR programs begin around 1.00, while better pricing and leverage often appear at 1.10, 1.15, or 1.20 and above. A 1.28 ratio creates $750 in monthly property cash flow before repairs, vacancy, capital expenditures, and management.
That is why an investor should not call every renovation a flip. A BRRRR operator may buy, renovate, rent, refinance with a debt service coverage ratio loan, and retain the asset. A clean DSCR refinance can be particularly valuable when personal tax returns do not reflect current portfolio growth. Rental income, not W-2 income, is doing the primary qualifying work.
| Decision point | Higher-leverage option | Lower-leverage option | Investor impact |
|---|---|---|---|
| DSCR lender access | More guideline-sensitive | More wholesale investor options | Lower leverage can improve approval flexibility |
| Purchase leverage | Up to 90% purchase financing | 80% to 85% purchase financing | More cash retained versus more equity protection |
| ARV exposure | Up to 75% ARV on qualified files | 65% to 70% ARV | Lower exposure reduces appraisal and resale pressure |
| Rate and points | Usually higher rate or points | Often better pricing | Compare total dollars, not the note rate alone |
| Close speed | 7 to 10 days when file and valuation support it | Similar or faster with clean documentation | Scope, appraisal, insurance, and entity documents control timing |
| Title costs | Standard third-party charges apply | Standard third-party charges apply | Duane’s preferred Title Company saves an additional $2,000 on average |
Current Investor Lending Conditions Reward Clean Deals
Investor capital remains available, but it is selective. Wholesale appetite is strongest for conservative ARV, verifiable renovation scopes, experienced operators, and markets with active buyer or rental demand. A project at 65% ARV with a realistic budget will usually receive a warmer response than a thin-margin deal asking for maximum leverage.
Rates and points move with leverage, credit, property type, loan size, experience, and the chosen exit. A quote at 75% ARV may cost more than a 70% ARV structure, but bringing another $20,000 to closing is not automatically the better decision. Compare the incremental cash required against the interest and points saved, then consider how much liquidity remains after closing.
Competition also changes the equation. In markets where renovated homes move quickly, investors are tempted to raise ARV assumptions and shorten construction schedules. Do not compete by pretending risk is gone. Win by having a documented scope, contractor bids, proof of funds for cash-to-close, a credible resale analysis, and a backup rental exit.
Protect the Exit Before You Fund the Renovation
Before closing, run a resale case and a hold case. In the resale case, reduce expected sale price by 3% to 5%, extend the timeline by 60 days, and add a 10% renovation contingency. In the hold case, use market rent supported by current rental comparables and calculate DSCR using the full projected payment, not just principal and interest.
For the Richmond property, a downside resale at $450,000 changes the gross spread from $125,000 to $110,000. With the same $11,250 of five-month interest, $8,500 in financing costs, and roughly $30,000 in sales costs, projected profit falls to about $60,250. Still workable, perhaps, but no longer casual. If the project takes seven months, profit falls again.
For a refinance exit, a $3,450 rent and $2,700 all-in payment create 1.28 DSCR. But if actual market rent is $3,100, the ratio falls to 1.15. That can still fit many programs, but loan amount, rate, and reserve requirements may change. This is why a soft credit pull mortgage review and property analysis should happen before the contract deadline, not after demolition begins.
A soft pull mortgage broker can review credit and structure without creating a hard inquiry during initial planning. A no hard inquiry mortgage pre approval is useful when an investor is comparing projects, but it is not a commitment to lend. Final approval still depends on the appraisal, title, entity documents, insurance, liquidity, scope, and the wholesale investor’s complete underwriting review.
Flip Funding Example FAQ
1. Can a fix-and-flip loan cover the full renovation budget?
Yes, qualified programs can fund 100% of a documented rehab budget through draws, subject to purchase leverage, ARV limits, scope review, and borrower qualifications.
2. What is a typical maximum ARV percentage?
Many experienced-investor programs cap total exposure near 75% ARV. Newer investors may be limited to 65% to 70% ARV.
3. Do I need personal income to qualify?
Fix-and-flip underwriting focuses heavily on the project and borrower profile. A DSCR loan for the rental exit qualifies primarily from property cash flow rather than personal income.
4. How quickly can a flip loan close?
Clean files can close in 7 to 10 days. Appraisal timing, entity setup, title issues, insurance, and incomplete scopes can extend that timeline.
5. What reserves should I expect?
Expect to document liquidity for down payment, closing costs, and often several months of interest payments. Six months is a practical planning benchmark.
6. Can I close in an LLC?
Business-purpose investor financing is commonly LLC-friendly. The exact vesting, guarantor, and operating agreement requirements depend on the selected program.
7. What if my flip does not sell on schedule?
Extend the project if available, reduce price, or execute the rental refinance exit if rent and DSCR support it. Plan both exits before purchase.
8. Is a soft credit pull the same as final approval?
No. A soft pull helps evaluate options without an initial credit hit. Final approval requires full underwriting and may require a hard inquiry.
Send the Deal Before the Opportunity Gets Repriced
A fundable flip is built on disciplined numbers: realistic comps, a line-item scope, enough reserves, and an exit that still works when the schedule slips. Submit the purchase contract, scope, contractor bid, property photos, comparable sales, entity details, and liquidity snapshot early. That gives the broker room to compare DSCR and investor-purpose options across the wholesale network instead of accepting the first structure offered.
Legal disclaimer: This article is for educational purposes only and is not a commitment to lend, a loan approval, legal advice, tax advice, investment advice, or a guarantee of property value, rental income, rates, terms, timing, or profit. All financing is subject to credit, property, appraisal, title, liquidity, underwriting, program guidelines, and applicable law. Business-purpose and DSCR availability varies by state, borrower, property type, and wholesale investor.
Duane Buziak, Mortgage Maestro | NMLS: 1110647 | Licensed in VA · FL · TN · GA · DC | UWM PRO ELITE 2025 | UWM Top 20 Purchase LO Virginia 2025 | UWM Speed to Close Industry Leading 2025 | Scotsman Guide Top Originator 2025 & 2026 | VA Broker of the Year 2024-2025 | Top 1% Nationwide | Coast2Coast Mortgage | DuaneBuziakMortgageMaestro.com | duane@coast2coastml.com | (804) 212-8663