Fix and Flip Keywords Every Investor Should Know
The fix and flip business moves fast and there’s an entire language to go with it. From loan terms to renovation lingo, understanding the most important fix and flip keywords can help you evaluate deals, secure financing, and communicate clearly with lenders, contractors, and buyers.
Here’s a glossary of the must-know fix and flip terms every investor should master.
Loan-to-Value (LTV)
Definition: The ratio of the loan amount compared to the property’s value (as-is or after-repair value)
Example: A $200,000 loan on a property worth $300,000 has an LTV of 67%
Why it Matters? Lenders use LTV to measure risk.
Loan-to-Cost (LTC)
Definition: The ratio of the loan amount compared to the total project cost (purchase price and rehab)
Example: If you buy a property for $150,000 and budget $50,000 for renovations, total cost = $200,000. A $160,000 loan equals an LTC of 80%.
Why it Matters? LTC determines how much cash investors must bring to the table.
After-Repair Value (ARV)
Definition: The estimated value of a property after renovations are complete.
Why it Matters: ARV helps investors project resale price, calculate profit margins, and secure financing.
Pro Tip: Always use local comps to build a realistic ARV.
Draw Schedule
Definition: The structured timeline for releasing rehab funds as project milestones are met.
Why it Matters: Ensures that contractors are paid on time.
Carrying Costs
Definition: Ongoing expenses you pay while holding a property - mortgage interest, taxes, utilities, insurance, and maintenance.
Why it Matters: Longer projects = higher carrying costs, which eats into profits.
Hard Money Loan
Definition: A short-term loan commonly used for fix and flip projects, secured by the property.
Why it Matters? Provides fast, flexible funding when traditional banks won’t lend.
Scope of Work (SOW)
Definition: A detailed outline of all renovations planned for the property.
Why it Matters: Keeps contractors accountable and prevents costly surprises during rehab.
Exit Strategy
Definition: The investor’s plan for recouping their investment. Typically a resale (fix and flip), refinance (BRRRR), or rental hold.
Why it matters: Determines loan structure, renovation approach, and timeline.
The Bottom Line for Investors
Mastering these fix and flip keywords gives you an edge in evaluating deals, negotiating with lenders, and running projects smoothly. Ready to get the funds for your next flip? Call Barnett REI Finance at 224-205-7266 and let’s make your project a success!