Fix and Flip Loans in Miami: How to Finance a House Renovation

Miami-Dade and Broward have a deep supply of concrete block houses built from the 1940s to the 1970s, and a large pool of buyers for renovated ones. A flip here usually means a new roof, impact windows and doors, new electrical and plumbing, a new kitchen and baths, and a house that sells to an owner-occupant. The financing has to cover the purchase and the whole renovation, and the plan has to account for costs that are specific to South Florida.

How the loan is sized

A fix and flip loan combines a share of the purchase price with the renovation budget, and the total is capped at a share of the after-repair value (ARV).

The rehab money is not paid at closing. It is held back and released in draws as each stage of work is inspected and completed, so you or your contractor need enough cash to start each stage.

Costs that are specific to South Florida

• The hurricane code. Miami-Dade and Broward are in the High-Velocity Hurricane Zone. A new roof, windows and exterior doors must use products approved for it, and impact windows are often one of the largest line items in the budget.
• Insurance. Insurers usually ask for a four-point inspection on an older house and look first at the roof, the electrical panel and the plumbing. A wind mitigation report on the finished house can lower the premium for your buyer, which helps the sale.
• The 50% flood rule. In a FEMA flood zone, a renovation that costs 50% or more of the building’s market value means the house must meet current flood rules, which can require elevating it. Some cities count improvements over several years. Ask the building department before you set the scope.
• Unpermitted work. Enclosed garages, added bedrooms and converted efficiencies are common. Pull the permit history before you buy, and budget to legalize or remove what was never permitted.
• Property tax while you hold. An investment property gets no homestead exemption, and combined rates are often close to 2% of taxable value. Carry the tax in your holding costs.
• Closing taxes. Florida charges documentary stamp tax on the deed, usually paid by the seller: $0.70 per $100 in most counties, and in Miami-Dade $0.60 per $100 on a single-family home. A new mortgage adds note stamps of $0.35 per $100 and intangible tax of 0.2% of the loan.

Permits and historic districts

Miami-Dade has 34 cities and Broward 31, and each runs its own building department, so review times and rules vary from one street to the next. Exterior work in historic districts, such as Morningside and Buena Vista East in Miami or much of Miami Beach, needs approval from the city’s preservation board as well as a permit.

The exit

Most flips end in a sale to an owner-occupant, so your after-repair value should come from recent sales of renovated homes nearby. If the market slows, a DSCR rental loan can replace the flip loan and turn the house into a long-term rental, with a cash-out refinance at up to 80% loan-to-value.

Common questions