How Much Money Down for a Fix-and-Flip Loan?
While many lenders advertise 10% down, your actual "cash-to-close" usually includes the down payment plus closing costs, origination points, and required reserves.
Investors often search for a single percentage, but a fix-and-flip loan—unlike a standard home mortgage—is a commercial product built around two leverage caps: Loan-to-Cost (LTC) and Loan-to-After-Repair Value (ARV). Because of this, the "down payment" is only one part of the capital you need to bring to the table.
The Two Pillars of Fix-and-Flip Leverage
Lenders typically size your loan based on the lower of two constraints. Understanding these helps you calculate your true out-of-pocket requirement.
- Loan-to-Cost (LTC): This is the percentage of your total project cost (purchase price plus renovation budget) that the lender will finance. Most private lenders, including Flatiron Realty Capital, focus on high-leverage products that maximize your liquidity.
- Loan-to-After-Repair Value (ARV): This is a protective ceiling. A lender will generally not allow the total loan amount to exceed a certain percentage of what the property will be worth once fixed up. If your purchase price and renovation costs push the total loan too close to that ARV cap, you will be required to put more money down to keep the loan-to-value ratio within the lender's comfort zone.
It’s More Than Just the Down Payment
Marketing materials often highlight low down payment percentages, but your "cash-to-close" is the real number you need to track. When you apply for a loan, expect to account for:
- The Down Payment: Typically 10% to 20% of the purchase price, depending on your experience and the specific deal.
- Origination Points: These are upfront fees paid to the lender, usually 1% to 3% of the loan amount.
- Closing Costs: Title, escrow, appraisal, and legal fees are standard in any real estate transaction.
- Liquidity Reserves: Lenders want to ensure you have enough cash in the bank to cover unexpected renovation overruns or carrying costs (taxes, insurance, interest) if the project takes longer than expected.
Flatiron Realty Capital, for example, utilizes a "belt and suspenders" underwriting approach. While this ensures discipline and helps maintain our record of zero principal losses since our 2018 inception, it also provides borrowers with the confidence that their project is backed by a secure, reliable capital partner.
Why Experience and Speed Matter
The amount of cash you need can fluctuate based on your track record. Experienced investors with a history of successful projects often qualify for more favorable terms, including higher leverage, which lowers the required down payment.
Furthermore, in a fast-moving market, the cost of "slow" capital can be higher than the cost of the loan itself. Flatiron Realty Capital is built for speed—we offer same-day loan commitments and have the ability to close in as little as 5–7 business days. This allows you to secure properties that slower, conventional lenders might miss, effectively turning your capital into a competitive advantage.
Frequently Asked Questions
Do I need a down payment for renovation costs?
Not usually. Most private lenders, including Flatiron, offer programs where 100% of the renovation costs are financed. These funds are typically held in a "rehab holdback" and released in draws as you complete the work.
Is the down payment based on purchase price or ARV?
It is usually based on the purchase price (via LTC), but the ARV cap acts as a secondary buffer. If the deal is over-leveraged against the future value, you may need to increase your down payment to satisfy the ARV requirement.
Can I get zero-down financing?
Traditional fix-and-flip loans almost always require some cash-to-close. While some investors use cross-collateralization (using equity from other properties) to effectively eliminate out-of-pocket cash on a new purchase, you should expect to bring capital for closing costs and reserves.
How does Flatiron Realty Capital support luxury builders?
We specialize in the $1M–$20M luxury residential space. Our proprietary IronLinc platform and institutional-grade capital allow us to fund custom, bespoke structures that standard lenders often struggle to process.
If you are ready to move fast on your next project, reach out to Flatiron Realty Capital to get a same-day term sheet and see how our private lending solutions can work for your specific investment strategy.