How Much Down Payment Does a Fix and Flip Loan Need?

Plan on putting down roughly 10% to 25% of the purchase price on a fix and flip loan, and sometimes more. That range is typical across the industry and directional only. Where you land depends on your experience, the deal, and how the lender structures the rehab money. Current terms for Riverside Park Capital are on the fix and flip loan page.

The down payment is only part of your cash need, though. Closing costs, interest, and reserves also come out of your pocket. Most declined or restructured deals trace back to a borrower who budgeted for the first number and not the rest.

Why is it a percentage of the purchase and not the whole project?

Fix and flip lenders usually lend against two things: the purchase price and the renovation budget. The purchase portion is often described as loan-to-value (LTV, the loan as a share of the property's value) or as a share of price. The rehab portion is often held back and released in stages as work is completed.

Many lenders also look at loan-to-cost (LTC, the loan as a share of purchase price plus rehab budget) and at after-repair value (ARV, the estimated value once work is finished). A lender will often cap the loan at both a percentage of total cost and a percentage of ARV. Whichever cap is lower sets your real down payment.

What changes the number?

Lenders adjust the required cash based on risk. The usual factors:

• Experience. Borrowers with several completed flips often get more leverage than first-timers. A newer investor may be asked for more cash or a tighter rehab scope.
• Credit and liquidity. Stronger credit and documented reserves can lower the cash required. Thin reserves can raise it.
• Rehab size. A cosmetic update carries less risk than a gut renovation or added square footage. Heavier scopes tend to mean more borrower equity.
• ARV support. If comparable sales are thin or the ARV looks optimistic, the lender may lend against a lower value.
• Property and location. Condition, property type, and local resale depth all matter.

A simple hypothetical

Take a made-up deal. You buy a house for $200,000 and plan $50,000 of work, so total cost is $250,000. Suppose a lender lends up to 85% of the purchase and all of the rehab, with a cap at 70% of ARV, and the ARV is $330,000.

The purchase portion would be $170,000, and the rehab $50,000, for $220,000. The ARV cap would be $231,000, so the first limit governs. Your down payment is $30,000, or 15% of the purchase. These are illustrative numbers, not any lender's terms.

Now suppose the appraiser puts ARV at $290,000. The 70% cap drops to $203,000, so the loan shrinks by $17,000 and your cash need rises by that amount. A small change in the value estimate can move the down payment more than a point of interest rate would.

What other cash do I need besides the down payment?

Plan for these on top of the down payment:

• Closing costs and lender fees, including origination points
• Appraisal, title, insurance, and inspection costs
• Monthly interest, which on many flip loans is interest-only
• Rehab costs you fund first when the lender reimburses through draws
• Reserves for overruns and carrying costs if the sale takes longer than planned

The draw point catches people. If a lender reimburses after work is inspected, you front the money for each phase. Your working cash has to cover that gap.

Why do deals get declined or restructured?

The common causes are practical. The borrower cannot show the down payment funds as seasoned, meaning sitting in an account long enough to document their source. The rehab budget has no contractor bids behind it. The ARV comps do not support the plan. Or the numbers work only if nothing goes wrong, leaving no cushion for delay.

When a deal is restructured instead of declined, it often means a lower loan amount, a smaller rehab scope, or a request for additional reserves. That is the same math as above, adjusted to a more conservative value.

What should I have ready?

• Purchase contract and property address
• Itemized rehab budget with contractor bids
• Comparable sales supporting your ARV
• Two to three months of bank statements showing down payment and reserves
• A summary of past flips, if any, with addresses and results
• Entity documents, if you are buying through an LLC
• Your planned exit, sale or refinance, and a realistic timeline

Having these in hand before you request a quote makes the cash requirement clearer early, and it is easier to adjust a deal before you are under contract than after. When you are ready to compare structures, review the program details on the fix and flip loans page, or start a request through the application.