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When Does a Fix & Flip Become a New Construction Project?
For real estate investors, the line between a Fix & Flip Loan and a New Construction Loan can sometimes blur. What might be seen as a straightforward rehab can quickly turn into a project requiring full reconstruction—or even ground-up construction. Understanding when a project transitions from one category to another is critical, as it affects financing, timelines, and overall project risk.
At LYNK Capital, we provide tailored funding solutions for both fix-and-flip investors and developers. If you’re unsure whether your project still qualifies as a renovation or if it requires new construction financing, this guide can help clarify the key differences and when a loan transition may be necessary.
Fix & Flip vs. New Construction: What’s the Difference?
A Fix & Flip Loan is designed for investors purchasing a distressed property to renovate and resell at a profit. These projects typically involve:
- Cosmetic updates (flooring, paint, fixtures)
- Kitchen and bathroom remodels
- Structural repairs (roofing, plumbing, electrical)
- Moderate additions (extending a room, finishing a basement)
A New Construction Loan, on the other hand, is meant for ground-up projects or major reconstructions that require extensive development work, such as:
- Demolishing an existing structure to rebuild from scratch
- Expanding the property significantly (e.g., adding a second or third floor)
- Heavy structural changes that require tearing down most of the original structure
When Does a Fix & Flip Cross into New Construction?
Sometimes investors plan for a fix-and-flip but find that their scope of work expands beyond a typical rehab. Here are the key indicators that your project may require a New Construction Loan instead of a Fix & Flip Loan:
1. More Than 50% of the Structure is Being Removed
If your renovation requires removing most of the walls, foundation, or roof, it likely will no longer qualify as a fix-and-flip. Lenders generally view projects with excessive demolition as new construction.
2. Extensive Structural Changes
If your plans include significant structural modifications, such as moving load-bearing walls, reinforcing the foundation, or adding multiple stories, your project may be classified as new construction.
3. Adding Significant Square Footage
A simple addition, like enclosing a patio, may still qualify for a Fix & Flip Loan. However, doubling the size of a house or adding new floors requires a different level of financing and approval.
4. Local Zoning & Permitting Requirements
Cities and counties have different rules regarding what constitutes a renovation versus new construction. If your project requires new construction permits (rather than renovation permits), you may need to shift your financing approach.
How to Secure the Right Loan for Your Project
If your fix-and-flip is evolving into a larger project, it’s essential to have the right financing in place to avoid delays or unexpected capital shortages. At LYNK Capital, we offer both Fix & Flip Loans and New Construction Loans, ensuring you get the funding that aligns with your project’s needs.
Fix & Flip Loans:
Best for cosmetic and moderate renovations, with quick funding and competitive rates.
New Construction Loans:
Designed for extensive reconstructions and ground-up builds, providing flexible draws and extended timelines.
Need Financing? Let’s Talk.
Have a project in mind? Our team is here to guide you through the financing process and help you maximize your returns. !