On a fix and flip loan the scope of work is not paperwork. It is the document that connects the money you borrow to the value you will create. The appraiser reads it to set the after-repair value (ARV), the lender reads it to size the renovation part of the loan, and the inspector uses it to release each draw. Passy Capital finances purchase plus renovation up to 90% of total cost, so a large share of the loan depends on how credible this document is.
What a lender checks, line by line
| What the lender checks | What good looks like | What raises questions |
|---|---|---|
| Detail | Each room and system listed with quantities and finishes | "Kitchen: $80,000" with nothing behind it |
| Pricing | Matches a signed contractor bid and local costs | Numbers well below what local contractors charge |
| Consistency with ARV | Finishes match the comparable sales the appraiser will use | Luxury budget in a mid-market street, or the reverse |
| Permits | Permitted work identified, with fees and timing | Structural, electrical or layout changes with no permit line |
| Contingency | A line for the unexpected | No contingency on an older building |
| Timeline | Stages with realistic durations | A full gut renovation in a few weeks |
| Draw schedule | Draws follow the stages and the budget | Most of the money requested up front |
Why the scope sets the loan amount
The loan is tested twice. Against cost: purchase plus renovation budget, up to 90% LTC. Against value: the appraiser's ARV, which depends on what the scope says you will build. A specific, well-priced scope supports both tests. A thin one produces a cautious ARV, and the loan is cut to fit it. The LTC vs ARV entry works through the numbers.
How the budget is paid out
Renovation money is not handed over at closing. It is drawn in arrears against completed work: you or your contractor finish a stage, an inspector confirms it against the scope, and the lender releases that stage's funds. Interest runs only on what has been drawn. That is why the scope's stages and the draw schedule have to line up: an inspector can only approve work that the scope describes.
Plan your cash so the contractor can complete a stage before the draw arrives. A first draw that comes after demolition and rough work is normal.
How experience changes the review
An investor with completed flips of similar size and scope gets less scrutiny on each line, because their past budgets are evidence. A first-time flipper, or someone moving from cosmetic work to structural work, should expect closer review, a stronger contractor and a bigger contingency. See how much experience a fix and flip loan needs.
Checklist before you submit
Passy Capital's fix and flip loans run from $1M to $5M, 12 months interest-only, no prepayment penalty, for US and foreign investors on the same terms. See fix and flip loans and renovation loans.
- Scope by room and by system, with finish levels
- A signed or near-final bid from a licensed contractor
- Permits listed, with who pulls them and when
- A contingency line
- A stage-by-stage timeline and the draws that match it
- Comparable renovated sales that justify the finishes you chose
Common reasons a budget is cut
- Lump-sum lines with no quantities or finishes
- A contractor bid that does not match the scope submitted
- Finishes above what the comparable sales support