Bridge / fix-and-flip

Does your product fit here?

Bridge and fix-and-flip loans are short-term financing secured by residential real estate where the exit strategy is sale or refinance, not long-term ownership. Your borrower is typically a real estate investor, not an owner-occupant. The property may need renovation or may already be stabilized. The defining characteristics: 6-36 month term, interest-only, investor-purpose, and repayment depends entirely on executing the exit.

Products that fit here:

Fix-and-flip loans: Short-term loans to investors purchasing properties requiring renovation. Proceeds fund acquisition and rehab; exit is sale after renovation. Typical term is 6-18 months. LTV is based on ARV (after-repair value). Major originators include Kiavi, Lima One, CoreVest, and Roc Capital.
Investor bridge loans: Short-term financing for stabilized or near-stabilized rental properties. Exit is refinance into a long-term DSCR loan or sale. Used for acquisitions, portfolio repositioning, or liquidity events. Term is 12-24 months.
Ground-up construction (residential): New construction of 1-4 unit residential properties by investors. Longer timeline (12-24 months), draw-based funding, exit is sale or refinance. Many lenders group this with fix-and-flip due to similar underwriting considerations.
Aggregation bridge: Short-term financing while an investor aggregates a portfolio before refinancing into long-term SFR financing or selling to an institutional buyer.

What does NOT fit here:

DSCR rental loans (long-term): 30-year amortizing loans secured by stabilized rental properties. See Single-Family Rental.
Owner-occupied bridge: Bridge loans to consumers between homes. Different regulatory treatment (QM/ATR applies), different risk profile. See Non-Agency RMBS.
Commercial bridge (5+ units, office, retail): CRE bridge is a different asset class with different underwriting standards. See CRE CLOs.
Hard money with no defined exit: If the business model relies on extending and collecting fees rather than repayment, capital providers will view this differently and price accordingly.

Edge cases

Fix-to-rent: Acquisition plus renovation with intent to hold as rental. This is a hybrid with bridge economics during renovation and rental economics post-stabilization. Lenders may structure it as a bridge loan with a built-in refinance into a long-term DSCR product.

Small multifamily (2-4 units): If investor-owned and short-term financing, it fits here. If 5+ units, it gets treated as CRE bridge with different underwriting criteria.

Land plus construction: If financing includes land acquisition plus build, the timeline extends and underwriting changes materially. Some lenders include this in their bridge programs; others carve it out as a separate product.

How lenders will classify you

Loan Type	Term	LTV Metric	Advance Rate	Typical Pricing
Fix-and-flip	6-18 months	75-85% purchase / 85-90% ARV	Combined LTV	10-12% + 2-4 pts
Investor bridge	12-24 months	70-80% current value	As-is LTV	9-11% + 1-3 pts
Ground-up construction	12-24 months	70-80% cost / 65-75% ARV	LTC and ARV	11-14% + 2-5 pts

Illustrative pricing. See pricing disclaimer.

Market benchmarks and comps

Performance benchmarks by loan type

Metric	Fix-and-Flip	Investor Bridge	Ground-Up Construction
Default rate (annualized)	3-7%	2-5%	4-8%
Extension rate	35-50%	25-40%	40-60%
Loss severity	15-30%	10-25%	20-35%
Average actual loan term	9-14 months	12-18 months	14-22 months
WAL	0.8-1.2 years	1.0-1.5 years	1.2-1.8 years
Gross yield (lender)	12-16%	10-14%	13-17%

The key metric: extension rates

Unlike long-term mortgages where CDR is your primary performance metric, the critical number for bridge and fix-and-flip is extension rate. Borrowers frequently miss their target payoff date due to construction delays, market conditions, contractor issues, or refinance timing. Extension rates of 35-50% are normal for fix-and-flip. Capital providers underwrite for this.

If your extension rates exceed 55-60%, it signals origination quality issues, overly aggressive timelines, or market deterioration. This is the metric capital providers will scrutinize most closely.

What “good” performance looks like

Default rate below 5% annualized for fix-and-flip, below 3% for stabilized bridge
Extension rate below 45%
Loss severity below 25% (implies quick disposition and reasonable LTV discipline)
Loans resolving (paid off or refinanced) within 15 months average
No single loan exceeding 24 months outstanding without workout classification

Red flag performance benchmarks

Default rate exceeding 8% for any recent vintage
Extension rate above 55% with an increasing trend
Loss severity above 35% (indicates your LTV was too aggressive or the market has declined)
Average resolution time exceeding 18 months
Increasing concentration of loans in the 18+ month bucket without corresponding payoffs

Important: If your extension rate is rising while your payoff rate is flat, you’re building a backlog of problem loans. Capital providers will notice this before it shows up in your default numbers.

What lenders and investors focus on

The borrower in bridge/fix-and-flip is a professional investor, not a consumer. Capital providers underwrite the sponsor as much as the property.

What they look at:

Number of completed projects (exits) in the last 3 years
Track record by property type and market
Financial capacity to carry multiple projects simultaneously
Prior defaults or workouts with any lender

Lenders tier sponsors into experience buckets: “new” (0-5 completed deals), “experienced” (6-20 deals), and “professional” (20+ deals). Advance rates and pricing differ by tier, often by 5-10% on advance rate. A new sponsor with no track record pays more and gets less leverage than a professional with 50 deals under their belt.

2. LTV and LTC (as-is, ARV, and cost basis)

Capital providers evaluate three leverage metrics simultaneously:

As-is LTV: Loan amount divided by current appraised value. Typically 65-80%.
ARV LTV: Loan amount (including rehab holdback) divided by after-repair appraised value. Typically 65-75% for fix-and-flip.
LTC (loan-to-cost): Loan amount divided by total project cost (acquisition plus rehab). Typically 80-90%.

Capital providers stress-test all three. The binding constraint determines your advance rate. You may have room on ARV but be constrained by LTC, or vice versa.

For ground-up construction, LTC is the primary metric. For fix-and-flip, the combined LTV/ARV framework governs. If your underwriting only looks at ARV without as-is and LTC constraints, capital providers will flag it.

3. Exit strategy viability

This is where bridge loans differ fundamentally from long-term mortgages. The borrower’s ability to pay you back depends entirely on executing the exit.

Sale exit: Are comp sales supporting the ARV? Is the market active? What are days on market for similar renovated properties in that submarket? If days on market have doubled in the last 6 months, your borrower’s timeline assumptions are stale.

Refinance exit: Does the property cash flow at stabilization? Can the borrower qualify for take-out financing (DSCR loan, bank loan)? If the refinance market tightens, borrowers who planned to hold may be forced to sell.

Capital providers underwrite the exit, not just the collateral. A well-located property with no realistic exit is a workout waiting to happen.

4. Property type and location

SFR vs. small multifamily: SFR (single-family residential) is most liquid. 2-4 unit properties are less liquid but still manageable. Anything larger than 4 units shifts to CRE underwriting.

Market tier: Primary markets (top 25 MSAs) get the best terms. Secondary markets get 5-10% lower advance rates. Rural or tertiary markets may not be eligible at all, or require significant additional credit support.

Property condition: Cosmetic rehab (paint, flooring, fixtures) carries less execution risk than structural work (foundation, roof, plumbing). Structural rehabs require more scrutiny on contractor qualification and budget contingency.

Geographic concentration: Portfolios with single-state concentration above 25% get extra scrutiny. Single-MSA concentration above 15% is a flag.

5. Renovation scope and budget

Rehab budget as percentage of purchase price:

Cosmetic: 10-30%
Moderate: 30-60%
Heavy: 60%+

Heavy rehabs carry more execution risk and typically require more experienced sponsors.

Draw mechanics: How are rehab funds released? Upfront release is rare and aggressive. Milestone-based draws (after framing, after rough-in, at completion) are standard. In-arrears draws (borrower pays, then gets reimbursed) shift risk to the borrower but slow the project.

Contractor qualification: Is the GC licensed? Is the scope of work documented? Is the payment schedule aligned with the draw schedule? If your borrowers are using unlicensed contractors, expect capital providers to ask questions.

Budget contingency: A 10-15% contingency is standard. Less than 10% means any cost overrun blows the budget. Capital providers will assume some overruns occur and want to see the buffer.

Typical structures used

Warehouse facility

The dominant structure for bridge/fix-and-flip originators.

Advance rate: 70-85% of originator’s loan balance (varies by LTV tier of underlying loans)
Pricing: SOFR + 250-400 bps for prime programs; SOFR + 350-550 bps for higher LTV or less experienced originators
Revolving period: 12-24 months; may include accordion for growth
Facility size: $25M-$500M; $1B+ for scaled platforms like Kiavi or Lima One
Draw mechanics: Warehouse advances against closed loans. Rehab draws are funded by the originator first, then pledged to the warehouse as drawn.

Warehouse facilities typically require seasoning before a loan is eligible (closed, funded, first draw complete). Some facilities advance against rehab holdback; others require the rehab to be drawn before counting toward the borrowing base.

Forward flow / whole loan sale

Capital provider (typically a credit fund) commits to purchase closed loans at an agreed advance rate or discount. Common for emerging originators building track record who don’t yet have the volume or infrastructure for a warehouse.

Pricing: Discount to par based on yield and expected loss; buyer targets 12-15% net yield
Benefit: Allows originator to recycle capital without warehouse infrastructure
Limitation: Less flexibility than a revolving facility; may require selling below optimal economics

Term ABS (securitization)

Larger originators periodically securitize portfolios in 144A format.

Typical deal size: $200M-$500M
Agencies: Moody’s, S&P, KBRA
Enhancement levels: 15-30% subordination depending on LTV distribution and sponsor concentration
Major issuers: Kiavi, Lima One, CoreVest, Roc Capital

Securitization is the cheapest long-term capital but requires significant infrastructure, track record, and scale. Most originators need 3+ years of performance data and $500M+ annual origination to be a regular issuer.

Participation structures

Bank or fund takes a senior participation (70-80% of each loan); originator retains junior/first-loss.

Senior pricing: SOFR + 200-350 bps
Benefit: Originator maintains servicing and customer relationship
Economics: Originator earns return on subordinate piece plus servicing fee

Common when the originator wants to maintain customer relationships but needs to recycle capital. The senior participant gets first-loss protection; the originator keeps the upside from excess spread.

Asset-class-specific structural features

Draw mechanics

Rehab holdback is the distinguishing feature of fix-and-flip financing. The warehouse funds the purchase portion immediately. The rehab portion is held back and drawn as construction progresses.

Draw request process:

Borrower completes phase of work
Borrower submits draw request with supporting documentation
Third-party inspector verifies work complete (inspection cost: $100-$200)
Funds released to borrower

Holdback release: Typically 10% of the total holdback is retained until project completion to ensure punchlist items are addressed. This protects against borrowers abandoning the final 5% of work.

Capital providers scrutinize draw administration. How quickly are draws processed? Is inspection verification consistent? If your draw process is sloppy, it creates loss exposure.

Extension provisions

Initial term: 12 months is typical for fix-and-flip; 18-24 months for bridge.

Extension options: 2-3 extensions of 3-6 months each are standard. Total term with extensions may reach 24-36 months.

Extension fees: 0.25-1.0% of outstanding balance per extension. This is revenue for the originator but also signals project distress.

Extension conditions: Loan must be current, no material adverse change in property or borrower, property progress on track. If the borrower has done nothing in 12 months, the extension should be denied.

Discretionary vs. automatic: Most extensions require lender approval. Automatic extensions (borrower exercises at will) are aggressive from a credit perspective and will concern capital providers.

Interest reserves

Bridge and fix-and-flip loans frequently include interest reserves: 6-12 months of interest capitalized at closing.

Purpose: Reduces monthly payment burden during renovation period when the property generates no income.

Economics: Interest reserve is funded from loan proceeds. The borrower pays interest on the interest (negative amortization), but monthly cash outflow is zero or minimal.

Reserve release: Unused interest reserve is released at payoff or applied to reduce payoff amount.

Maturity default treatment

The primary loss driver in bridge lending is maturity default, not payment default. Borrowers who make every payment but can’t exit at maturity still require workout.

Workout process: Extension negotiation, forbearance, deed-in-lieu, foreclosure. Timeline varies dramatically by state (judicial vs. non-judicial foreclosure). Non-judicial states like Texas may resolve in 60-90 days. Judicial states like New York may take 18-24 months.

Capital providers model foreclosure timelines by state and weight portfolio exposure accordingly.

Rating agency treatment

S&P approach

Sponsor concentration: Heavy focus on repeat borrower performance and concentration limits
LTV stress: ARV haircut of 20-35% for AAA scenarios
Extension assumption: 40-50% of loans assumed to extend beyond initial term
Foreclosure timeline: 12-24 months depending on state judicial vs. non-judicial
Servicing continuity: Strong focus on backup servicing and warm standby requirements

Moody’s approach

Independent valuation: Requires property valuation review on a sample (5-10% by count or value)
Sponsor risk: Explicit sponsor risk assessment embedded in loss assumption
Geographic sensitivity: Concentration stress based on regional market correlation
Market value decline: Peak-to-trough assumption of 25-35% for residential in stress scenarios

KBRA

Active in bridge/fix-and-flip securitizations
Competitive with S&P and Moody’s on enhancement levels
Strong focus on originator operational capabilities and servicing infrastructure
May offer more accommodating treatment for originators with strong track records

Typical credit enhancement levels

Rating	Fix-and-Flip (75% ARV)	Bridge (70% LTV)
AAA	25-32%	20-28%
AA	18-24%	15-20%
A	12-18%	10-15%
BBB	6-12%	5-10%

Enhancement levels vary significantly based on LTV distribution, sponsor concentration, and geographic mix. A portfolio with 85% ARV loans will require materially more enhancement than one at 70% ARV.

Diligence focus areas

Tape analytics

Required fields: Loan ID, origination date, maturity date, original balance, current balance, property address, property type, purchase price, as-is appraised value, ARV, rehab budget, rehab drawn to date, LTV (as-is), LTV (ARV), LTC, loan rate, origination fees, extension count, sponsor ID, sponsor experience tier, loan status.

Critical data fields: Rehab drawn percentage (how far along is the project?), extension count (is this loan already extended?), days to maturity (how much runway remains?).

Stratification tables:

LTV bands: < 65%, 65-70%, 70-75%, 75-80%, 80%+
Sponsor experience: new, experienced, professional
Property type: SFR, 2-4 units, condo
Geography: state, top MSAs
Loan age: 0-6 months, 6-12 months, 12-18 months, 18+ months
Rehab completion: 0-25%, 25-50%, 50-75%, 75-100%
Exit type: sale vs. refinance

Repeat borrower concentration: If your top 10 sponsors represent more than 30% of the portfolio, concentration risk exists. Capital providers will stress-test what happens if your largest borrower defaults across all their loans.

Sponsor performance tracking: Track default and extension rates by sponsor. Some sponsors are serial extenders. Others execute consistently. You should know which is which.

Sponsor financial verification: Personal financial statement, liquidity (can they fund cost overruns?), net worth requirements. Many programs require sponsors to have liquidity equal to 10% of their aggregate loan exposure.

Property-level diligence

Sample appraisal review: Capital providers will review 5-10% of appraisals by value. Are ARV assumptions reasonable? Are comps genuinely comparable?

BPO vs. full appraisal: Warehouse providers may accept BPOs for smaller loans (under $500K). Securitizations require full appraisals.

ARV reasonableness: Does the renovation scope support the ARV lift? A $50K cosmetic rehab shouldn’t produce a $200K value increase.

Photo documentation: Capital providers expect before, during, and after photos for fix-and-flip loans. If you can’t produce progress documentation, it raises questions.

Originator operational diligence

Draw administration: How are draw requests processed? What is the inspection protocol? How long from draw request to funding?

Extension policy: Is extension discretionary or automatic? How are troubled loans identified and escalated?

Workout capability: Can you handle workouts, foreclosures, and REO disposition in-house, or do you outsource? If outsourced, to whom?

Site visit: Capital providers typically require an operational site visit for a first facility. They want to see your team, your systems, and your documentation.

Active participants

Major originators

Scaled platforms: Kiavi (formerly LendingHome), Lima One Capital, CoreVest Finance, Roc Capital, Visio Lending, Finance of America Commercial

Regional players: Angel Oak, Constructive Capital, RCN Capital, Toorak Capital Partners, Groundfloor

Emerging / tech-enabled: Backflip, Longhorn, CIVIC Financial Services

Banks providing warehouse

Goldman Sachs, JPMorgan, Citi: large programs for scaled originators
Customers Bank, Western Alliance (formerly Pacific Western): fintech and bridge specialists
Credit Suisse (historically), Barclays: larger programs with securitization pathway
Cross River Bank: fintech-oriented partnerships

Credit funds (warehouse and forward flow)

Blackstone (investor in Finance of America)
Oaktree Capital, Ares Management, KKR: direct lending into bridge space
Angelo Gordon, AG Mortgage Investment Trust
Colony Credit Real Estate, TPG RE Finance Trust
Cerberus, Benefit Street Partners

Insurance capital buyers

Insurance companies purchase rated tranches (AA and above) from securitizations. They do not provide warehouse directly.

Principal, Prudential, MetLife: active buyers of residential bridge ABS
Require rated paper with investment-grade ratings

ABS underwriters

Goldman Sachs, JPMorgan, Wells Fargo: lead bookrunners
Academy Securities, Piper Sandler: smaller programs
Nomura, RBC: active in bridge/fix-and-flip securitization

Law firms

Issuer counsel: Sidley Austin, Mayer Brown, Dechert, Cadwalader

Lender/underwriter counsel: Latham & Watkins, Orrick

Strong in residential/bridge: Ballard Spahr, Alston & Bird

Red flags and off-market characteristics

Performance red flags

Extension rate above 55% and rising over consecutive quarters
Default rate above 8% for any vintage
Loss severity above 35%: indicates LTV was too aggressive or the market has declined
Average resolution time exceeding 18 months
Growing concentration of loans in the 18+ month bucket without payoff acceleration

Originator red flags

Rapid volume growth (above 75% year-over-year) without corresponding infrastructure investment
High sponsor concentration: single sponsor above 10% of portfolio
Geographic concentration: single state above 40%, single MSA above 25%
Extension policy that automatically extends without re-underwriting the exit
No workout or REO disposition capability (relies entirely on foreclosure attorneys)
Regulatory issues: state licensing gaps, any consumer lending compliance problems

Structural red flags

ARV-only underwriting without as-is and LTC constraints
No sponsor experience tiering (treating a first-time flipper the same as someone with 100 deals)
Rehab holdback released without inspection verification
No interest reserve for loans with heavy rehab
Unlimited or automatic extension options
No backup servicer or inadequate servicing continuity plan

Market red flags

Local market oversupply of renovated homes (inventory rising)
Days on market increasing in target markets
Comp sales declining or sale-to-list ratio falling below 95%
Rental rate compression in target markets (undermines refinance exit viability)
Construction cost inflation outpacing ARV growth (squeezes margins)

Note: Monitor your exit success by market. If one MSA is showing 60%+ extension rates while others are at 35%, you may have a local market problem that will eventually become a portfolio problem.