Fix and Flip Financing in NYC: Draws, Permits, Exit

Updated 2026-08-19 8 sources

General information about how this works in New York City — not financial, tax, or legal advice, and not an offer of credit. lender.nyc is not a lender or a mortgage broker and is not licensed by NY DFS.

A fix-and-flip loan funds the purchase and the renovation as one facility, sized against what the property will be worth when the work is done. The lender advances most of the purchase price at closing, holds the entire rehab budget back, and releases it in inspected draws — which means you finance the construction out of pocket and get reimbursed, not the other way around. In New York City the binding constraint is almost never the money. It is the Department of Buildings calendar.

How the loan is sized

Three ratios do all the work, and every lender applies all three, taking whichever binds first.

LTC (loan-to-cost) governs the purchase advance. Kiavi’s site advertises “up to 100% LTC,” Lima One advertises “up to 95% LTC,” and West Forest Capital publishes up to 80% of purchase price — all as advertised on their own websites, reviewed August 2026. The gap between those numbers is mostly experience: maximum leverage attaches to sponsors with a track record of completed projects, not to first-timers.

Rehab holdback is usually the full budget. Kiavi publishes “100% of rehab cost”; Lima One publishes “100% of rehab budget with draws as fast as 24 hours”; RCN Capital publishes up to “100% of purchase price + 100% of renovation costs.” That sounds like a no-money-down product. It is not, and the third ratio is why.

LTARV (loan to after-repair value) is the ceiling that actually binds. RCN publishes a cap “not exceeding 75% ARV.” Kiavi publishes “80% ARV.” West Forest Capital publishes “up to 70% of the ARV.” Total dollars out — purchase advance plus every draw — cannot exceed that fraction of the appraised after-repair value.

A worked example

Take a two-family in Ridgewood: $900,000 purchase, $250,000 scope, and an appraiser who supports a $1,350,000 ARV.

You bring the $137,500 difference plus points, mortgage recording tax, title, both attorneys and the appraisal. If the appraiser comes in at $1,250,000 instead, the ARV ceiling drops to $937,500 and you find another $75,000 the week of closing. ARV risk is equity risk, and it lands on you, not the lender.

Draws: the part that fails people

The mechanics are unglamorous and they decide who survives.

1. You complete a defined stage of the approved scope — demo, rough plumbing and electric, insulation and sheetrock, finishes.
2. You pay your contractor for that stage from your own funds.
3. You request a draw, itemized against the schedule of values the lender approved at closing.
4. The lender orders an inspection. Someone physically confirms the work exists.
5. The lender wires the reimbursement, often net of a draw fee.

Read that order again. You fund the work, then get reimbursed. A borrower with the down payment and nothing behind it cannot run this process, because there is always a stage in progress that nobody has paid for yet.

A New York-specific wrinkle: your contractor’s payment expectations and the lender’s inspection cycle rarely line up. NYC subs frequently want deposits before mobilizing, and no lender reimburses a deposit for work that does not yet exist. Assume you are floating one full stage plus deposits at all times.

The DOB reality

This is what separates an NYC flip from a flip anywhere else.

Alt-2 versus Alt-1. An Alteration Type 2 covers work that does not change the Certificate of Occupancy — interior renovation, non-structural partitions, kitchens and baths, mechanical replacement. An Alteration Type 1, filed as an Alt-CO in DOB NOW, is required when the project results in a new or amended Certificate of Occupancy: use changes, adding or removing dwelling units, enlargements, or changes to occupant load or means of egress. Both filings must be prepared and submitted by a Registered Architect or Professional Engineer — neither is a do-it-yourself filing.

The practical consequence is that Alt-1 work rarely fits inside a 12-month loan. Plan examination, objections, resubmission, then permit, then construction, then sign-off and the amended C of O. Independent NYC trade sources commonly describe Alt-1 approval running several months against roughly one to three months for a straightforward Alt-2, and objections extend both. Meanwhile your interest-only carry runs every single day.

That is the honest reason the classic five-borough flip is cosmetic and mechanical inside the existing C of O: kitchens, baths, floors, windows, boiler, electrical service. Not because those deals are more profitable, but because they are the only scopes whose permitting fits inside private-lender time.

Expediters. A filing representative who knows the borough office is not a luxury here. They will not make DOB approve anything faster in principle, but they prevent the avoidable objection that costs you six weeks, and they track the filing while you run the job.

Asbestos. Before DOB issues a permit for covered work, an ACP-5 (or an ACP-21 where abatement is required) must be filed. In a pre-1987 building — which describes most of the NYC housing stock investors buy — this means engaging a DEP-certified asbestos investigator early. Discovering friable material in old pipe insulation after demolition has started means an abatement contractor, a separate permit track, and weeks you did not budget.

Landmarks. If the property sits in a historic district or is an individual landmark, the Landmarks Preservation Commission has jurisdiction over exterior work — windows, doors, storefronts, facades, roofs visible from the street, rear yard additions. Minor in-kind work can move on a staff-level permit; anything requiring discretionary judgment goes to a Certificate of Appropriateness with a public hearing, and the LPC calendar is not fast. Brownstone Brooklyn, Greenwich Village, Harlem’s historic districts and much of the Upper West and East Sides are affected. LPC sign-off precedes the DOB permit, so it sits at the very front of your schedule. Verify a property’s landmark status before you go into contract, not after.

Co-ops, condos, and rent-regulated units

Co-ops are effectively unflippable. The board interviews and can reject a purchaser without stating a reason, alteration agreements govern the renovation and often require the shareholder to post a deposit and carry specific insurance, many offering plans and proprietary leases restrict resale timing outright, and flip taxes commonly running 1% to 3% of the sale price are levied on the seller. Layer on that most private lenders will not take shares as collateral, and the strategy collapses at the financing stage before the board ever sees you.

Condos are workable but not free. The board typically holds a right of first refusal that must be waived, which takes weeks. Common charges and real estate taxes accrue during your hold and are part of the carry. Building alteration rules apply on top of DOB. Since January 2026, co-op and condo boards must attest in DOB NOW that they have reviewed and approved a unit owner’s renovation plans before DOB will accept the filing — which puts the board squarely inside your permitting critical path.

Rent-regulated units are a different business entirely. Since the 2019 HSTPA, renovation-based rent increases on stabilized apartments are capped by statute. The FY24 budget revised the framework effective October 17, 2024: broadly, a $30,000 spending cap over 15 years amortized at 1/168th for buildings of 35 or fewer units and 1/180th for larger ones, with a $50,000 cap available for qualifying long-vacant units subject to prior DHCR certification. Whatever the exact figures for your building, the point stands — you cannot renovate your way to market rent. A “gut and reposition” underwriting thesis on a stabilized building is not a flip; it is a decade-long hold with regulatory risk.

The exit math

Compute the sale side before you buy.

On the seller side you pay the NYC Real Property Transfer Tax — commonly cited at 1% of consideration up to $500,000 and 1.425% above it for residential — plus the New York State transfer tax at roughly 0.4%, rising for very high-value transfers. Call it about 1.4% to 2.1% of gross sale price, before broker commission and before your attorney.

On the buyer side, the state mansion tax starts at 1% on residential purchases of $1,000,000 or more. You do not pay it, but you feel it: it creates a hard demand cliff just under $1M. A renovation that pushes your Bay Ridge two-family from $985,000 to $1,020,000 may add nothing to your net and may cost you buyers.

Then time. NYC resale is attorney-driven and slow: contract out, purchaser’s diligence, mortgage commitment, board approval where applicable, then closing. Even a clean 1-4 family sale in Queens or Staten Island commonly runs 60 to 90 days from accepted offer to closing, and a condo with a right-of-first-refusal waiver runs longer. That is two to three months of interest and taxes after the work is finished, and it is why a 12-month loan on a 6-month renovation is tighter than it sounds.

Realistic all-in hold periods: an outer-borough cosmetic 1-4 family, 8 to 12 months. Anything needing an Alt-1, an LPC certificate of appropriateness, or asbestos abatement — plan for 18 months and price the extension fee into the deal on day one.

This page is informational and is not financial, tax or legal advice. Confirm every lender figure directly with the lender, and confirm filing requirements with your architect, expediter and New York counsel.