How to Get Fix and Flip Loans in California: A Complete Guide

Real estate investors in California use fix and flip loans to fund purchases and renovations of investment properties. With the hot real estate market in cities like Los Angeles, San Francisco, and San Diego, fix and flip projects can generate big profits.

But finding the right lender for fix and flip loans in California takes some research. This guide covers tips for securing the best financing for your next fix and flip project in CA.

What Are Fix and Flip Loans?

Fix and flip loans are short-term loans designed for financing real estate investment deals Borrowers purchase a property that needs renovations, use the loan funds to renovate the home, then sell it for a profit

Key features of fix and flip loans include:

• Up to 90% loan-to-cost (LTC) financing

• Interest-only payments during the loan

• Short 6-12 month loan terms

• Fast approvals and funding in a week or less

• No prepayment penalties

The high leverage and speed of fix and flip loans make them ideal for flipping projects that will sell in less than a year.

Top Lenders for California Fix and Flip Loans

Finding a lender familiar with the California real estate market is key when seeking fix and flip financing. Here are some top lenders offering fix and flip loans in CA:

LendingOne

• Loans from $100k to $15M
• Up to 85% LTC financing
• Rates as low as 7.49%
• 10 day average funding time

FixFlipLoans.com

• Loans from $45k to $3M
• Up to 90% LTC financing
• 7-10 day funding
• 12 months interest-only

Cativest

• Loans from $75k to $5M
• Up to 95% LTC financing
• Rates from 7% to 14%
• 5-10 day funding

Lima One Capital

• Loans from $75k to $5M
• Up to 80% LTC financing
• Rates from 8% to 13%
• 10 day funding

Getting a Fix and Flip Loan in California

If you want financing for a California fix and flip project, follow these key steps:

1. Find a property and create a renovation budget

Evaluate potential investment properties and create a detailed rehab budget. Lenders will review this.

2. Check your credit score and history

Most fix and flip lenders want to see credit scores of 600 and above. Pay down debts to boost your scores before applying.

3. Gather your financial documents

Lenders will want to verify your income, assets, and cash reserves. Have bank statements, tax returns, and other files ready.

4. Pick a lender and apply for preapproval

Submit a loan preapproval application with a potential lender to get approved before making an offer.

5. Make an offer and start renovations

After securing the property, begin renovations using the loan funds. Finish work within budget and on schedule.

6. Sell and repay the loan

List the renovated home for sale. Repay the fix and flip loan fully when you close on the sale.

What Do Lenders Look for When Underwriting Fix and Flip Loans?

Lenders will scrutinize these key items when reviewing a fix and flip loan application:

Loan to Cost Ratio (LTC) – Most want to see 70-85% LTC to cover purchase and rehab costs. Lower LTCs are less risky.

Loan to After Repair Value (ARV) Ratio – Lenders prefer 60-75% LTV based on the projected home value after renovations.

Borrower Credit Scores – Minimum scores of 600-650 are typical requirements. Scores of 700+ get the best rates.

Cash Reserves – Lenders want to see reserves equal to 3-6 months mortgage payments to cover costs overruns.

Rehab Budget – Detailed contractor estimates for all renovation work are required. Budgets must support projected ARV.

Contractor Relationships – Having a reliable licensed contractor ready to start work can improve approval odds.

Exit Strategy – Lenders look for a clear plan to sell the renovated home within 6-12 months after funding.

Documents Needed for Fix and Flip Loan Underwriting

To prove your experience, here are some key documents lenders will require during underwriting:

• Credit reports and scores – Usually minimum scores of 600-650

• Financial statements – Tax returns, bank and brokerage statements proving assets

• Property information – Purchase contract, comps, inspection reports, appraisal

• Scope of work – Detailed rehab budget with contractor estimates

• ** Contractor information** – Licenses, sample work, references

• Experience documentation – Past project details verifying your ability to execute successful flips

• Exit strategy – Recent comps proving the after repair value you expect

Having all paperwork ready speeds up the underwriting and approval process.

Improve Your Chances of Fix and Flip Loan Approval

Follow these tips to get your California fix and flip loan application approved:

• Work to improve your personal credit score above 700
• Save money for unexpected overages beyond the renovation budget
• Line up your licensed contractor ahead of time
• Research recent comparable sales to support your after repair valuation
• Only take on rehab projects well within your experience level
• Have a strong marketing plan ready for quickly selling the renovated home
• Seek loan preapproval from multiple lenders to compare options
• Be ready to personally guarantee the loan if you have limited real estate experience

With the right preparation and lending partner, financing your next California fix and flip project can be a smooth and profitable process. The key is setting yourself up for approval during the application process.

California Fix and Flip Loan Rates and Terms

Fix and flip loan rates and terms vary by lender, but you can expect:

• Interest Rates: 7% to 15%

• Origination Fees: 2% to 5% of loan amount

• Loan Terms: 6 to 12 months

• Loan Amounts: $75k to $15 million

• LTC Financing: Up to 90% of purchase and renovation costs

• Points: 0 to 4 points

• Prepayment Penalties: None typically

Shop multiple lenders to compare loan offers and identify the best rates and fees for your particular deal.

How Much Can You Borrow for a Fix and Flip in California?

The amount lenders will provide for a California fix and flip loan depends on factors like:

• Your personal credit scores and real estate experience

• The purchase price and estimated rehab costs

• The expected after repair value (ARV)

• How much of your own cash you will invest

As a general guideline, borrowers can qualify for:

• 60% to 90% of the purchase price

• Plus 60% to 100% of estimated renovations

So on a $400,000 purchase with $100,000 in planned renovations, a lender may provide $340,000 for the purchase plus the full $100,000 for repairs, or $440,000 total.

Having a larger personal investment in the deal can help you qualify for maximum loan amounts from lenders.

Should You Use a Mortgage Broker for Fix and Flip Loans?

An experienced mortgage broker can help you compare multiple lenders and identify the best fix and flip loans for your particular deal. Potential benefits of using a broker include:

• Access to more lenders – Brokers have relationships with dozens of fix and flip lenders.

• Streamlined applications – Brokers handle all the paperwork and submissions.

• Loan matching expertise – Brokers can match your project to the ideal loan program and lender.

• Advocacy and guidance – Brokers represent your interests throughout the process.

• Potentially better rates – Broker relationships may lead to rate discounts.

Just be sure to choose an established brokerage with extensive experience specifically in investment property loans. They will have the best access to competitive CA fix and flip lenders.

The Costs of a Fix and Flip Loan in California

When budgeting for your fix and flip project in California, factor in these typical financing costs:

• Interest payments – Based on the loan’s rate, which runs 7% to 15% usually.

• Origination fees – 1% to 5% of the total loan amount.

• Points – Additional upfront fees, often 1 to 4 points.

• Rehab holdbacks – Interest accrues if you don’t fully use repair funds.

• Loan extension fees – If you need more time and extend the loan term.

• Lender fees – Doc prep fees, underwriting fees, etc. that lenders charge.