Weighing The Benefits and Risks of Fix and Flip Investments

Learn about the benefits and risks associated with fix and flip investments to determine if it’s right for you!

Fix and Flips are certainly a popular type of real estate investment, and for good reason. A successful fix and flip has the potential to generate high profits. However, no great reward exists without possible risks.

Consider the benefits and risks below to help you determine if a fix and flip is the right investment for you!

Benefits of Fix and Flips

Potential for high returns

The idea when investing in a fix and flip is to buy low and sell high. If you can purchase a distressed home at a low cost, make renovations and sell it for much higher than the original purchase price, you’ll see high returns. Especially if you’re in a hot market where you’re able to resell at an above market cost.

Quick turnaround

Typically fix and flips are done with a sense of urgency. The loans are generally short term, ranging from 12 to 24 months. The faster you can fix and flip a home, the sooner you can start on your next investment and continue building your portfolio.

Efficient and flexible loan options

Fix and flip loans are commonly referred to as bridge loans or rehab loans and are provided in order to assist in renovation expenses. These loans typically have a very straightforward application process making financing quick and simple. These short term loans also have no prepayment penalty and can be interest only.

Risks of Fix and Flips

Cash reserves

Although loans are surely an option, an investor needs to account for unexpected issues that may arise during the rehab process. Issues that were not addressed during inspection can reveal themselves well into the project, so making sure you have enough cash to cover extra costs and still make your loan payments is essential. Some lenders will include reserves for payments and/or contingencies, ask your lender about these options.


Fix and flip projects require your time and attention. Having a good relationship with your lender and contractors will lead to success, so taking time to develop those relationships will be helpful. Due to unexpected issues that can arise, you’ll want to make sure you’re available and consistently supervising the project. Addressing issues as soon as they arise and keeping the project on track for a quick closing is important if you want to maximize your returns.

Once you’ve determined if a fix and flip investment is right for you, be realistic about the project. Acknowledge the current conditions, the amount of work required for resell, and have a clear vision of what the finished project will look like. Having a solid understanding of your project, the market you’re investing in, and what financing options you have will help promote success in your fix and flip endeavors.

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About CALCAP Lending

A division of CALCAP Advisors, CALCAP Lending benefits from the expertise of a seasoned team of professionals with extensive, successful track-records covering a variety of disciplines and leading large, nationally-recognized institutions. A private money direct lender, CALCAP Lending provides short to mid-term financing for property investors and businesses looking to purchase, refinance, renovate, and construct residential or commercial properties.

Lending FAQs

You've got questions, we've got answers.

What is private money lending?

Private money lending is a collateral-based lending strategy that is often associated with shorter terms and more attractive features. A private money loan offers more flexibility than a conventional mortgage or bank loan.

How does a private money loan work?

Private money lenders provide financing using money from private entities. Private money loans often work as bridges to help investors gather funds to achieve their short term real estate goals, but long term, permanent options may also provide.

Why would I choose a private money lender?

There are many advantages to using a private money lender for your real estate investments! Private money lenders can be more lenient when it comes to borrower credit issues, often there are no prepayment penalties, you can leverage your cash to buy multiple properties, and private money loans are quicker when compared with institutional loans.

Can I get prequalified for a loan?

CALCAP has a responsive loan team who are able to prequalify you. Contact a loan specialist at 833.816.5580 to get started.

How long does the lending process take?

Private money lending can be a quick and painless process. From start to finish, 30 days is common, however, turn around times can be as short as 10 business days.

Can I still be approved for a loan if I have bad credit?

Generally yes, we understand that people have temporary financial issues that come up, and we want to work with you to help you rise up financially to a better place. Offsets to credit concerns may include experience as a real estate investor, good cash reserves, and/or larger down payments.

I am a broker or investor, how can I work with CALCAP?

Business is built on relationships. Ours is no different. CALCAP Value and Preferred Partners receive exclusive rates and services. For more details and to submit your application, visit our partners page.

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