Guide to Fix & Flip Loans for Foreign Investors in US Real Estate

The US real estate market attracts tens of billions of dollars annually in foreign investments. There are many different reasons why foreigners invest in US real estate, one of the main ones being a relatively high return on investment (ROI), especially when compared to other countries that offer international investment opportunities. 

One of the best ways to maximize your ROI is to find a distressed property, renovate it, and sell it for profit — or simply fix and flip it. And, if you choose to do this in the US, you won’t have to finance the entire venture out of pocket. You can, instead, consider fix and flip loans for foreigners to help buy or even renovate the property you want to flip.

In this article, we’ll talk about fix-and-flip loans for foreigners to help you better understand how they work. We’ll share the most important information about these types of loans with you. We’ll talk about different approaches lenders will take to decide on the loan amount, as well as the main requirements you should expect to fulfill before applying for and getting fix-and-flip loans for international investors.

Fix and Flip Loans for Foreigners: What Are They?

Fix-and-flip loans for foreigners are nonresident mortgages aimed at helping real estate investors purchase a property that needs renovation. These loans have higher interest rates than regular mortgages, usually above 10%. 

The main goal of fix-and-flip loans for nonresidents is to give investors enough financial help to buy distressed or undervalued real estate, make renovations to increase its value, and ultimately sell the property for profit or refinance it. They are a great option for investors looking to generate high returns in a relatively short period of time. 

Fix-and-flip loans for foreigners are generally interest-only loans. This means that borrowers pay only interest for the duration of the loan term (between 12 to 18 months) and don’t build equity in the property. The borrowers pay the loan principal only after the property is sold or refinanced.  

Fix and Flip Loans for Nonresidents: Two Ways of Approach

What makes fix-and-flip loans for international investors unique, among other things, is how lenders decide on the amount of money they want to lend to borrowers. They rely on one of the two following metrics: loan-to-value (LTV) or after-repair value (ARV).

Fix and Flip Loans for Foreigners: Loan to Value Approach

Loan-to-value is simply defined as a percentage of the property’s value that lenders are willing to lend to borrowers.  When it comes to fix-and-flip loans for foreigners, LTV is usually between 70% and 80% of a property’s value. For example, if a piece of real estate is worth $200,000, the lenders will be willing to lend between $140,000 and $160,000. If it’s worth $400,000, the loan amount will be between $280,000 and $320,000, and so on. 

With the loan-to-value approach, lenders only finance the property purchase, not renovation. If you go this route, you, as a borrower, will be responsible for covering the renovation cost. But what if you don’t have the money to renovate your newly found property? What happens then? Well, this is exactly where the ARV approach comes into play. 

Fix and Flip Loans for Foreigners: After Repair Value Approach

The after-repair value (ARV) approach allows borrowers to finance the purchase and renovation costs of a property. As the name suggests, instead of relying on the property’s current value to determine the loan percentage, the ARV metric considers its value after renovating it, which allows borrowers to loan more money. 

For example, if a property’s current value is $200,000 and the after-repair value is estimated at $300,000, the lenders will use the latter number as a starting point to determine the loan amount. So, instead of lending you 70% or 80% of the purchase price ($200,000), they will lend you 70% or 80% of the updated value ($300,000). Or, in this case, between $210,000 and $240,000.

The only downside of the ARV approach is that lenders will employ added scrutiny and inspectors to determine the property’s potential value after it’s been renovated. This makes ARV fix-and-flip loans for foreigners a bit harder to get compared to the LTV ones. 

Fix and Flip Loans for International Investors: Main Requirements

Because the financial system in the US is highly developed and there is a lot of competition, the exact requirements for a fix-and-flip loan for foreigners will depend on each lender. However, for the most part, lenders will expect you to have:

• International credit history — The assumption is that you, as a foreign investor, don’t have a US credit score or history. Because of that, some lenders will ask you to provide them with credit reports from your home country. Note that this is not always mandatory, as there are lenders who will work with you even if you don’t have any credit history (US or otherwise).
• Proof of assets — Lenders will want to see different financial documentation that proves you have enough assets to cover the down payment (between 20% and 30% of LTV or ARV) and closing costs and that you have 6-12 months of cash reserves for loan payments, taxes, and insurance.
• Identification documents — Lenders will expect you to prepare different identification documents, such as a valid passport or a national identity card.
• Elaborate project details — Before approving your fix-and-flip loan for foreigners, lenders will want to see detailed plans for the property’s renovation (including budgets and timelines). Some lenders might want to do their own research and will employ certified inspectors to validate the project information you’ve provided. 
• Experience and proof of it — If you can show lenders the proof of your experience in fixing and flipping properties, you can expect a better deal with a faster closing time. We must note that this isn’t a must-have, but it can make the loan process easier. 
• ITIN or EIN — Taxes are associated with every real estate transaction in the US. To pay them, you’ll have to get an ITIN number. Alternatively, if you purchase a property via US LLC, you won’t need an ITIN but will instead have to get an EIN number.
• Readiness and finances to deal with high interest rates — Fix-and-flip loans for international investors have higher interest rates than conventional mortgage loans. They are usually above 10% (or between 10% and 12%, to be more precise). 

How to Obtain Fix-and-Flip Loans for Foreign Investors: 2 Key Steps 

Securing a fix-and-flip loan as a foreign investor involves steps primarily driven by the property’s value, renovation costs, and lender requirements. Here are two core steps you’ll encounter: 

1. Preparing Your Down Payment and Financial Projections 

When applying for a fix-and-flip loan, you’ll typically get to choose between two financing approaches — Loan-to-Value (LTV) or After Repair Value (ARV):

• LTV-Based Financing — With LTV loans, your down payment typically ranges from 20-30% of the purchase price. You’ll be responsible for covering the renovation costs. 
• ARV-Based Financing — In an ARV loan, the lender bases the loan on the projected value of the property after renovations. This option allows you to borrow more, often covering up to 70-75% of the purchase and renovation costs. However, you’ll need to provide detailed financial projections, and the approval process may take longer due to additional inspections and due diligence. 

2. Finding the Right Lender 

Foreign investors often face additional hurdles in the U.S. mortgage market, as not all lenders are open to working with nonresidents. To secure a loan, you have two options: 

• The DIY Approach — If you choose to find a lender on your own, research is essential. Each state has unique mortgage regulations, and only a limited number of lenders specialize in fix-and-flip loans for foreigners. 

Mortgage Broker Assistance — To streamline the process, consider using mortgage brokers who have established relationships with lenders specializing in foreign investor loans. Brokers can help you navigate the complexities of U.S. lending requirements and secure better loan terms.