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Ground-Up Construction vs Fix and Flip Loans
By Jaken Finance Group · Principal, Jaken Finance Group
Ground-up construction loan vs fix and flip loan compared — draw schedules, terms, leverage, timelines, and which financing fits new builds vs rehabs in 2026.
Ground-up construction loan vs fix and flip loan comes down to building new versus improving existing. A fix and flip loan funds purchase plus rehab against 75% of after-repair value on a 6–12 month term. A ground-up construction loan funds vertical work on vacant or scraped land, always the lower of cost and 75% of as-completed value, on a 12–18 month term. For unimproved vacant land before vertical starts, see unimproved vacant land loan. Both run on draw schedules rather than lump sums at 8.99%–13.5% interest-only. Using the wrong product stalls the job.
Full guide: For rates, terms, and a three-product decision matrix, see DSCR vs Hard Money vs Conventional (2026).
Key stats at a glance
- Both products’ rate: 8.99%–13.5% interest-only — Jaken Finance Group, 2026
- Fix and flip term: 6–12 months · Construction term: 12–18 months
- Fix and flip leverage: up to 100% LTC on qualified files, capped at 75% ARV
- Construction leverage: up to 100% LTC on qualified files, always the lower of cost and 75% of as-completed value
- Luxury construction: up to 100% LTC on qualified files up to $2.5M when finished value is $900K-plus
- Fix and flip close: 7–10 business days · Construction close: 10–14 business days
- Funding method: milestone draw schedule (both)
- Underwriting focus: ARV + scope (flip) vs plans, budget, and build team (construction)
Complete comparison matrix
| Factor | Fix and flip loan | Ground-up construction loan |
|---|---|---|
| Property state | Existing structure | Vacant / scraped land |
| Value basis | After-repair value (ARV) | As-completed value |
| Typical rate | 8.99%–13.5% IO | 8.99%–13.5% IO |
| Term | 6–12 months | 12–18 months |
| Max leverage | Up to 100% LTC on qualified files; 75% ARV cap | Up to 100% LTC on qualified files; lower of cost and 75% as-completed |
| Funding | Draw schedule (rehab milestones) | Draw schedule (construction milestones) |
| Draw stages | Fewer — demo, rough, finish | More — foundation, frame, MEP, finish |
| Permitting | Light-to-moderate | Full site + building permits |
| Underwriting focus | ARV, scope of work, experience | Plans, budget, GC, entitlements |
| Close speed | 7–10 business days | 10–14 business days |
| Execution risk | Lower | Higher — weather, subs, cost overruns |
| Exit | Sale or DSCR refi | Sale or DSCR refi |
| Best fit | Cosmetic-to-heavy rehab | New build, teardown-rebuild, infill |
| Profit ceiling | Bounded by existing footprint | Full control of design and margin |
Source: Jaken Finance Group loan parameters, 2026.
Dollar and timeline impact
Two projects targeting a $500,000 exit value:
| Path | Total cost basis | Term | Carry (11% IO, avg 60% drawn) |
|---|---|---|---|
| Fix and flip ($350K all-in, 9 mo) | $350,000 | 9 months | ~$17,300 |
| Ground-up ($400K all-in, 15 mo) | $400,000 | 15 months | ~$33,000 |
The build carries longer and costs more to hold — but ground-up gives complete control over layout, materials, and end use, which is why builders accept the longer clock in inventory-starved markets. Model each on the fix and flip calculator before locking scope.
Fix and flip loan details
Built for improving an existing property:
- Leverage against ARV (Jaken Finance Group caps at 75% ARV, up to 100% LTC on qualified files)
- Draw schedule funds rehab as milestones complete — you don’t front the renovation
- Short 6–12 month term matched to a sale or refinance exit
- Underwriting weighs ARV, scope of work, and borrower experience
- Fast 7–10 business day close for competitive acquisitions
See fix and flip loan requirements, 100% fix and flip financing, and rehab loans for investment property.
Ground-up construction loan details
Built for new vertical construction:
- Leverage against as-completed value, always the lower of cost and 75% of that value
- More granular draw schedule — foundation, framing, mechanicals, finish — with inspections at each stage
- Longer 12–18 month term to absorb permitting and build time
- Underwriting weighs plans, budget accuracy, the build team, and entitlements
- 10–14 business day close
- Luxury and $1 million-plus specs can reach up to 100% LTC on qualified files up to $2.5M. See luxury new construction and jumbo hard money.
New to building? See ground-up construction loans with no experience and the essential guide to construction loans.
Which should you choose?
Follow this decision path:
-
Is there an existing habitable structure to renovate?
- Yes → Fix and flip loan (unless a full teardown is planned).
- No → Ground-up construction loan.
-
Is the scope a full teardown-and-rebuild?
- Yes → Construction loan — you’re building new even on an old lot.
- No → Continue.
-
Does the timeline exceed 12 months?
- Yes → Construction loan — flip terms are too short.
- No → Fix and flip loan.
-
Do you have plans, permits, and a build team ready?
- Yes → Construction loan is executable now.
- No → Firm up the build package first; a light rehab flip may be the faster deal.
-
Planning to hold as a rental after completion?
- Either product exits into a DSCR refinance once the property is finished and stabilized.
Side-by-side: documentation requirements
| Document | Fix and flip | Ground-up construction |
|---|---|---|
| Scope of work / budget | Required | Required (detailed line-item) |
| Architectural plans | Not typical | Required |
| Building permits | Sometimes | Required |
| GC agreement / builder resume | Helpful | Required |
| Appraisal | ARV | As-completed |
| Entity docs (LLC) | Usually required | Usually required |
| Builder’s risk insurance | Required | Required |
| Reserves | Varies | Contingency reserve standard |
The teardown fork
If the existing house will be scraped, you are not “flipping harder.” You are building new on an old lot. Foundation, utilities, and a full vertical stack belong on a construction loan. A fix and flip term of 6–12 months will expire while the frame is still open.
Keep the flip product when a habitable structure remains and you are improving it. Studs-out rehabs that keep the foundation and roof can still be flips if the calendar is honest. The moment you pour a new foundation, switch products. Luxury new construction is the high-finish version. Mid-construction refinance is the rescue if you already started on the wrong stack.
$1 million-plus does not pick the product. Scope does.
A $1.15 million all-in gut of a standing house is a luxury flip or jumbo hard money file. A $1.15 million scrape-and-rebuild is construction. The dollar amount is the same. The draw schedule, term, and value test are not.
Luxury flips and specs up to $2.5M can reach up to 100% LTC on qualified files. They still cannot exceed 75% of after-repair or as-completed value — fund the lower number.
Worked example: gut versus scrape on the same street
Illustrative. Two lots, same collar school district.
File G — standing house. Purchase $640,000. Rehab $210,000. All-in $850,000. After-repair value $1,020,000. Structure stays. Flip loan. 75% of after-repair value is $765,000. 88% of cost is $748,000. Cost binds. Term 11 months.
File S — scrape. Land plus demo $640,000. Vertical $610,000. All-in $1,250,000. As-completed $1,480,000. Construction loan. 75% of as-completed is $1,110,000. 84% of cost is $1,050,000. Cost binds. Term 16 months. Carry is longer. You control layout. You also own winter concrete and millwork lead times.
Using File G’s flip term on File S is how the original lender freezes draws. Using File S’s construction budget on File G is how you over-improve a house that already had a roof.
Takeout after the work is done
Both products can exit to a sale or to DSCR at 5.75%–10.5%. Construction and just-completed specs take out at 70%–75% LTV. Do not model 85% permanent debt on a house that received a certificate of occupancy last week. Seasoned rental purchases can use the published DSCR purchase band. A spec is not seasoned.
Permits tell you which loan you already have
A cosmetic flip may need a kitchen permit. A construction loan needs a full building permit, inspections, and often a site plan. If the city treats your “heavy rehab” as a new dwelling, listen to the city. Their permit type is a better product label than your purchase contract.
Inspection cadence follows the product. Flip draws might be demo, rough, finish. Construction draws are foundation, frame, mechanical, drywall, finish, certificate of occupancy. Asking a flip desk to fund a foundation pour is how files bounce.
Contingency belongs in both budgets
Flip files need contingency on rehab. Construction files need 10%–15% on hard cost. Luxury millwork is where both budgets lie. If the bid is “allowance,” assume you will spend it. Construction loans will not increase the holdback because the slab was more interesting in person.
Weather is a construction risk. Tenant damage is a flip risk. Do not copy the other file’s contingency story.
Draw inspections are not optional on either product
Both loans fund work in the ground, not a lump sum at closing. A flip that skips inspections to “move faster” is how mechanic’s liens show up. A spec that skips inspections is how a frame sits uninsured. Third-party reports protect the sponsor as much as the lender. Budget days between inspection and the sub getting paid.
If the original construction lender already stopped inspections, do not ask a flip desk to take over. Use mid-construction refinance. The original construction calendar is already broken. A new flip term will not unbreak it.
Common mix-ups that waste a week
Calling a pop-up a flip because the tax parcel already existed. Calling a gut a construction loan because the budget is large. Sending land photos to a flip desk. Sending a six-month flip term on a 16-month permit path.
Start at new construction loans for investors if any of those sound familiar. Use luxury versus standard if the house is standing and the only argument is finish. Use this article when the argument is standing house versus new house. If the argument is loan size, go to jumbo hard money. If the argument is bank versus private, go to jumbo versus bank jumbo. Do not send all three arguments in one confused package. Pick the fork, then apply. A mixed package reads like the sponsor does not know the collateral. That delay costs more than picking the wrong label on purpose and correcting it in day two. Labels are cheap. Frozen draws are not. Pick the product that matches the dirt. Then fund it. Do not fund a slogan.
Sources
- Kiavi: Ground-Up Construction for Real Estate Investors 2026
- Scotsman Guide: Fix-and-Flip and Ground-Up Construction in 2026
- HUD: Housing programs overview
- Freddie Mac PMMS — benchmark context
Jaken Finance Group funds both products at 8.99%–13.5% interest-only on qualified files — fix and flip (75% ARV cap, 6–12 months, 7–10 business day close) and new construction (lower of cost and 75% as-completed, 12–18 months, 10–14 business day close). Compare the full lineup in DSCR vs hard money vs conventional.
Rates, terms and conditions offered only to qualified borrowers and are subject to change at any time without notice. All loans are subject to full underwriting for loan approvals. Jaken Finance Group only finances non-owner occupied investment properties.
Ground-Up Construction Loan vs Fix and Flip Loan: Which Is Right for Your Build? — next step (2026)
Match the product to the scope and clock: rehab an existing home on a flip loan, build new on a construction loan — and price the extra carry before you commit to the longer timeline.
Submit scenario · Pre-qualify · (833) 264-7776.