6 Things to Do Before Submitting Your First Fix-and-Flip Loan

Securing the right financing could make or break your real estate investment project, especially if you’re racing against the clock to seize the next big opportunity. For some real estate investors (REIs), bridge loans could be a lifeline when dealing with quick turnarounds, such as fix-and-flip projects or snagging a deal on a property before long-term financing is in place.

As thrilling as the flipping process can be, submitting your first bridge loan isn’t something to rush into blindly. Whether you’re a first-time real estate investor or a seasoned pro branching out into short-term financing, taking the right steps beforehand could significantly improve your chances of success.

What Is a Bridge Loan, and Why Is It Useful?

A bridge loan is a short-term financing solution that can help real estate investors bridge the gap between purchasing a property and securing long-term financing or selling the property. For fix-and-flippers, these loans are perfect for quickly closing deals in highly competitive markets while giving you the time to renovate and sell the property for profit.

With faster approvals and flexible terms, bridge loans are attractive for real estate entrepreneurs who need funding to capitalize on high-potential properties. However, they can sometimes come with higher stakes, such as shorter repayment schedules and higher interest rates, making preparation absolutely essential.

Before you apply, here are the six steps you should consider taking to position yourself for success.

Step One: Understand Your Investment Property

Do you really know what you’re getting into with the property? It’s critical to evaluate the property thoroughly before applying for a bridge loan.

Analyze the property's potential ROI and ARV. Will the property generate enough return to justify the loan’s costs? Research the local market conditions, property comps (comparable sales data), and future demand. A great tool to simplify this process is Kiavi's ARV and Cash-to-Close Estimator, which helps you assess the property’s after-repair value and potential profitability. Check it out here: Kiavi ARV and Cash to Close Estimator.
Consider the renovation scope and timeline. Does this property require a light renovation or an extensive renovation? What is the scope of work you’ll need to complete? This impacts how long renovations could take and when you expect to sell or refinance the property. Since bridge loans are typically short-term (12–18 months), aligning the repayment schedule with the property’s timeline is an important consideration.

Understanding your property clearly could help you present a strong case to potential lenders and may increase your chances of being approved.

Step Two: Assess Your Financial Situation

After analyzing the property, it’s worth taking stock of your personal finances. While bridge loans are typically based on the property’s value rather than your personal income or credit, it’s always a good idea to feel confident in your financial standing before entering a loan agreement.

Key factors to consider include:

Credit Score: While bridge loans are asset-based, having a strong credit score (typically above 650) could improve your loan terms. If your credit score isn’t ideal, start taking steps to improve it.
Available Cash: While lenders like Kiavi offer fix-and-flip financing with up to 95%* leverage, you’ll still need some cash upfront to close on the property. Assess how much cash you have on hand to determine how much leverage you’ll need through financing.

Being mindful of your personal finances could not only help you choose the right loan, but it could also strengthen your position with a potential lender.

Step Three: Develop a Solid Business Plan

If you’re serious about securing financing for your real estate investment property, a strong business plan could be your best ally. Lenders want a clear strategy outlining how you’ll increase the property’s value and generate sufficient returns to pay off the loan.

Your business plan should cover, but not be limited to:

Project Scope: Detail the renovations or improvements you plan to make and how they’ll impact the property’s market value.
Budget: Provide a comprehensive breakdown of all costs, including purchase price, renovation expenses, loan fees, and contingencies. Make sure your numbers are realistic and account for unexpected challenges.
Exit Strategy: Explain how you’ll repay the loan, whether it’s through selling the property, renting out the property, and securing long-term financing, or another method.

Showing lenders that you have a well-thought-out plan can inspire confidence in your ability to manage the project and set you up for a smoother funding process.

Step Four: Prepare Your Documentation

Bridge loans are known for speed and simplicity, but there’s still some paperwork involved. To help streamline the application process, it’s a good idea to have your key documents ready.

Documents Required for a Kiavi Fix-and-Flip Loan:

Purchase agreement for the property
Business entity documents
Detailed project budget and timeline
Scope of work (for planned renovations or construction)
Proof of insurance (property or builder’s risk insurance)

Additional Documents a Lender May Request:

Proof of income (e.g., tax returns, pay stubs, or bank statements)
Personal financial statement (summary of assets, liabilities, net worth)
Property appraisal or inspection report
Legal documents related to the property (e.g., deed, title)

Being organized minimizes back-and-forth communication with your lender, shows you’re serious and well-prepared, and may help speed up the approval process.

Step Five: Find the Right Lender

No two fix-and-flip projects are the same, and neither are lenders. The right lender will align with your goals, offer competitive terms, and provide support throughout the loan process.

Here’s how to evaluate potential lenders:

Experience: Look for a lender who specializes in working with real estate investors and understands the unique challenges of your project.
Loan Terms: Compare leverage, interest rates, fees, and repayment schedules from different lenders. Some may offer better flexibility, which can be vital for your timeline.
Reputation: Research reviews and ask for recommendations from fellow REIs. A lender’s track record can give you valuable insight into how smooth the process will be.

Building a relationship with a lender who understands your goals can make all the difference in securing the funding you need.

Step Six: Understand Key Terminology in Bridge Loans

This step is often overlooked, but understanding the language of bridge loans could save you from confusion down the line. Familiarize yourself with key terms such as:

After-Repair Value (ARV): The estimated sale price of the property once the renovations are complete.
Loan-to-Value (LTV): The ratio of the loan amount to the market value of the property. This is the leverage you will have by financing your fix-and-flip project.
Interest-Only Payments: Many bridge loans require interest-only payments during the loan term, with the principal paid at the end.
Origination Fees: The upfront fee a lender charges for processing the loan, typically 1–3% of the loan amount.

Understanding these terms can help you navigate your loan with more confidence and may help prevent any surprises later. If you need a refresher or want to explore more commonly used real estate finance terms, check out our glossary for helpful definitions and explanations.

Set Your Project Up for Success

Submitting your first bridge loan can be an exciting moment in your real estate investing journey. By evaluating the property, assessing your financial picture, and finding the right lender, you could increase your likelihood of success.

Remember, preparation is everything in this business. Take the time to organize your documentation, write a compelling business plan, and educate yourself on the loan terms.

If you’re feeling overwhelmed or need help finding the right financing solution, Kiavi is here to help. With years of experience working alongside real estate investors, we provide accessible loan options and expert guidance tailored to your goals.

Start your real estate investing journey on the right foot. Reach out to us today!

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