Hard Money Fix and Flip Financing Pricing Guide

Are you a real estate investor or house flipper looking for better hard money fix and flip financing pricing on your next acquisition? Or, are you new to flipping houses and want to know the costs for hard money fix and flip financing for your first project? 

If so, you’ve come to the right place.  

First Capital Trust Deeds (FCTD) knows hard money lending, especially fix and flip financing. Since 2013, we've worked with numerous real estate investors and house flippers on their hard money fix and flip financing needs, securing loans from $100,000 up to $8.7 million.  

This pricing guide will cover the many different pricing variables that go into hard money fix and flip financing, including: 

• Interest Rates, Origination Points, Fees, & Costs 
• Pricing for Purchase + Rehab Financing
• Additional Costs, Extension Fees, Fund Control, Inspection Fees, etc. 

There is a lot to explore, so let’s get started! 

“What’s your hard money fix and flip pricing?” 

When new prospective borrowers call in, the first question they ask is, “What’s your hard money fix and flip pricing?” 

Our answer usually is, “We’re at 2 points, 10.99% interest-only, and 80-85% Loan-To-Value (LTV) on the purchase and 100% Loan-To-Cost (LTC) on the rehab with a 12-month term, give or take. Let’s talk about your scenario to see if we have the terms that you're looking for.” 

Usually, upon discussing their scenario, they fall into three camps. They may be relatively inexperienced (0-2 successful flips). Or, they're looking for 100% financing on the entire project because their liquidity is limited.

The third is that they're long-time house flippers with established relationships with a local hard money lender, who gives them 95-100% financing on their projects — but charges them 4 points at 13.00% during times when the market was 2 points at 9.00%. This prompts them to search the internet for lower-priced hard money fix and flip financing. Therefore, they’ve called FCTD to see if we could give them the same leverage of 95-100% LTV but at a much, much better price to boost their profit margins. 

Since you came here to find out about pricing, let’s get right to FCTD’s hard money fix and flip financing pricing guide, which breaks down terms for three different borrower experience levels, using a hypothetical flip scenario in a major urban or suburban market (not ex-urban or rural) with the following attributes:  

• $500,000 Purchase Price
• $100,000 Rehab Costs
• $750,000 After Repair Value (ARV)

Pricing by Borrower Experience Level

Borrower A (5+ flips per year): 
This experienced flipper could receive the best pricing at 1.5-2 points, 10.99% interest-only, at 85% LTV on the purchase — plus 100% rehab financing. That’s pretty good pricing!  

Borrower B (2-4 flips per year):  
This level of expertise would receive an offer of 2-2.5 points, 11-11.50% interest-only, at 80% on the purchase plus 100% rehab financing. 

Borrower C (0-1 flips per year)
This inexperienced borrower would be at 3 points, 12.00% interest-only, at 70-75% on the purchase plus 100% rehab financing. 

Additional Costs and Fees

Below are descriptions of the additional closing costs and fees you should expect with FCTD hard money fix and flip loans: 

• Appraisal Fee - $650: The lender will require an interior-exterior appraisal providing AS-IS value and after repair value (ARV).
• Underwriting Fee - $995: Sometimes this fee is called “Underwriting, Processing, or Doc Prep,” which represents the lender charge to underwrite and/or draft loan docs. 
• Rehab Inspection Fees - $600: For fix and flip loans with rehab financing, FCTD works with the lender, borrower, and contractor to determine the number of construction draws necessary. In this sample, there will be four draws of $25,000 each. Upon submitting a draw request from the borrower or general contractor, the lender will send an inspector to visit the property to verify that the draw request matches the work performed on the project. Borrowers pay for the $150 inspection fees up front in the loan closing costs.
• General Contractor Review - $350: Fix and flip lenders complete their due diligence on the general contractor by running background checks, and verifying that all license, bond, and insurance is in force and good standing. 
• Extension Fees: We didn't include an extension fee in the table above because extension fees only come into play when the loan reaches maturity, which is usually in 12 months. The cost is different for each lender, ranging from 0.25% to 1.00% to extend the loan for 3-6 months. 

In addition to closing costs and fees, borrowers must pay the following items prior to or through the close of escrow: 

• Insurance: If the loan has a 12-month loan term, the lender requires that the hazard insurance policy extends 12 months. The 12-month premium is paid in full either before closing (paid invoice required) or through the close of escrow.
• Flood Insurance: Every lender checks the FEMA flood maps to see if the subject property is in a flood zone. FCTD has originated numerous loans on properties in flood zones, especially in Florida. Flood policies must also be paid prior to closing or through the close of escrow.  
• Title/Escrow/Taxes and Recording Fees: All transactions require these fees. 

Summary

Each hard money fix and flip loan has its own set of challenges and circumstances that can cause variations from the sample chart above. In some cases, we may be able to get the interest rate for an “A” borrower down to 10.50% if they're buying the property at a 10% discount from AS-IS value. Or, if they're overpaying by 10% on the purchase, the interest rate could be 11.50% and the LTV reduced to 75%. For this reason, we tell inquiring borrowers that our pricing is “2 points, 10.99%, at 80% LTV — give or take.”

The FCTD loan team has extensive hard money lending experience, closing over 3,000 loans since 2013, and securing fix and flip financing for projects big and small. We're happy to discuss hard money financing for your next project. If you have questions about what you've read here —or have a specific financing scenario to discuss — please request a consultation today.