How do fix-and-flip and bridge loans work in New Hampshire?

What is a fix-and-flip loan?

A fix-and-flip loan is a short-term, business-purpose loan to buy a property and renovate it, then sell it or rent it out. Many of these loans cover part of the renovation too. That money is usually released in draws as the work gets done, often after an inspection confirms each stage.

Each lender sets its own terms, including how much of the purchase and renovation it will finance, how long the loan lasts and what it costs. Tom compares lenders so you can see those terms side by side.

What is a bridge loan?

A bridge loan is short-term financing that covers a gap: for example, buying an investment property now and paying the loan off when you sell another property or move into long-term financing.

Homeowners sometimes need a similar bridge to buy a new home before selling the old one. That works differently because it's a home you'll live in; see buying before you sell.

Why are these business-purpose loans?

Federal Truth in Lending rules (Regulation Z) don't cover credit made primarily for a business purpose. The official commentary treats credit to buy, improve or maintain a rental property the owner won't occupy as business-purpose credit, and buying a property to renovate and resell is a business activity too.

That means some consumer disclosure rules that apply to a home purchase may not apply. Ask for every term in writing, including fees, draw rules, any extension costs and any prepayment terms, and compare offers before you commit.

What do lenders usually look at?

• The property's after-repair value, estimated in an appraisal
• Your renovation budget and scope of work
• Your experience with past projects, if any
• The cash you'll bring for your share of the costs, plus reserves
• Your credit, and entity documents if you buy in an LLC
• Your exit plan: sell, or refinance into a long-term loan

Lenders weigh these differently, which is one reason comparing several matters.

What's the exit plan?

A short-term loan has to be paid off, so lenders want to know how. The usual exits are selling the finished property or refinancing into a long-term loan once the work is done and the property is rented.

For a rental, the long-term loan is often a DSCR loan, which qualifies on the rent, or a conventional investment property loan. If you bought with cash, delayed financing can let you take cash out sooner. Planning the exit before you buy helps you see whether the numbers work.

What should New Hampshire investors watch for?

Ask the town's building department which permits your project needs before you set a budget and timeline. Many New Hampshire homes are older, so plan for surprises in heating systems, wiring, roofs and wells or septic systems.

If the home was built before 1978, the EPA's lead renovation rule applies to paid work that disturbs painted surfaces, and the EPA says it also applies to people who flip homes for profit. Contractors need lead-safe certification.

Property taxes differ a lot from town to town, and they count in the carrying costs while you own the property. Each town page lists the current rate. Tom doesn't give legal or tax advice, so talk with an attorney and a tax advisor about how to hold the property and how a sale is taxed.