Not all flips are created equal. Some are clean, cosmetic rehabs\u2014new floors, fresh paint, updated fixtures\u2014and others are full-blown rebuilds that test an investor\u2019s skill and patience.<\/p>\n\n\n\n
But every so often, a deal comes along where the rehab budget outweighs the purchase price. Maybe you\u2019re buying a distressed property for $100,000, but the renovation will cost $150,000 or more.<\/p>\n\n\n\n
That kind of setup is what the industry calls a \u201clopsided deal.\u201d<\/p>\n\n\n\n
These projects can be risky, but also extremely profitable when done correctly. Understanding how lenders view these deals, when they can work, and how to approach them strategically can help you turn a seemingly \u201cimbalanced\u201d opportunity into a success story.<\/p>\n\n\n\n
At Finance of America Commercial, we regularly evaluate Fix and Flip projects that don\u2019t fit the cookie-cutter mold. Here\u2019s how to recognize a lopsided deal, why it happens, and what to consider before taking one on.<\/p>\n\n\n\n
A lopsided deal<\/b> occurs when the cost to renovate a property is greater than the price you paid for it.<\/b><\/p>\n\n\n\n
This isn\u2019t automatically a red flag, but it does require extra scrutiny.<\/p>\n\n\n\n
Most traditional lenders are more comfortable when renovation costs are less than or equal to the purchase price. It signals a more stable deal structure with lower risk exposure. When the rehab cost exceeds the acquisition price, it can raise questions about feasibility, value, and execution.<\/p>\n\n\n\n
Example:<\/b><\/p>\n\n\n\n At first glance, this looks heavily weighted toward construction. But if the numbers work\u2014and you can justify the scope, experience, and ARV\u2014this deal could still be profitable and fundable.<\/p>\n\n\n\n There are several reasons why the rehab cost might exceed the purchase price, and not all of them are bad. In many cases, it simply means you\u2019ve found a property in major disrepair<\/b> that needs a complete transformation.<\/p>\n\n\n\n In other words, lopsided doesn\u2019t always mean bad<\/b>, it just means more complex.<\/p>\n\n\n\n They absolutely can, but they require experience, precision, and the right lender.<\/p>\n\n\n\n A successful lopsided deal typically depends on:<\/p>\n\n\n\n If the project pencils out financially and the investor has a solid track record, lenders like FACo can structure the loan appropriately\u2014often based on loan-to-cost (LTC)<\/b> rather than just purchase price.<\/p>\n\n\n\n Here at FACo<\/b>, we understand that not every property fits a \u201cstandard\u201d model. Lopsided deals can make financial sense when the numbers and strategy align. <\/p>\n\n\n\n 1. We Evaluate by Loan-to-Cost (LTC)<\/b><\/p>\n\n\n\n Instead of capping leverage strictly on the purchase price, we evaluate the total project cost (purchase + rehab). This allows us to fund deals where renovation represents the majority of the investment.<\/p>\n\n\n\n For example:<\/p>\n\n\n\n 2. We Focus on Borrower Experience<\/b><\/p>\n\n\n\n When a project is heavily rehab-driven, experience is key. Lenders need confidence that you can execute a large renovation efficiently and manage contractors, inspections, and budgets.<\/p>\n\n\n\n 3. We Require a Detailed Scope of Work (SOW)<\/b><\/p>\n\n\n\n A line-item budget, timeline, and material breakdown are essential. The more comprehensive your documentation, the smoother the underwriting process will be. <\/p>\n\n\n\n 4. We Verify ARV Through Appraisal<\/b><\/p>\n\n\n\n Appraisers review your SOW and local comps to validate your projected after-repair value. If the ARV supports the total cost, the deal may still work despite being \u201clopsided.\u201d<\/p>\n\n\n\n 5. We Provide Flexible Draw Schedules<\/b><\/p>\n\n\n\n Because heavy rehabs require more capital early on, FACo can tailor draw schedules to align with project phases\u2014so you always have liquidity when it matters most.<\/p>\n\n\n\n A heavily rehab-weighted project introduces higher risk: more contractors, more moving parts, and more ways for timelines or budgets to slip.<\/p>\n\n\n\n That\u2019s why lenders like FACo typically prefer seasoned investors <\/b>with at least 3-4 prior properties for these deals. Experienced flippers understand:<\/p>\n\n\n\n If you\u2019re newer to investing, you don\u2019t have to avoid these deals altogether, but you may need to partner with a more experienced borrower<\/b> or start with smaller, cosmetic rehabs first. Once you\u2019ve built a proven track record, lenders will be far more open to funding ambitious, high-rehab projects.<\/p>\n\n\n\n For most fix-and-flip loans, lenders assess leverage based on loan-to-value (LTV)<\/b> or loan-to-cost (LTC)<\/b> ratios.<\/p>\n\n\n\n In a lopsided deal, LTV can be misleading because the property\u2019s as-is value is low, but the total project cost<\/b> (and ARV) justifies the higher rehab spend. That\u2019s where LTC becomes a more accurate benchmark.<\/p>\n\n\n\n LTC Formula:<\/b><\/p>\n\n\n\n LTC = (Loan Amount \u00f7 Total Project Cost) \u00d7 100<\/p>\n\n\n\n For example:<\/b> By focusing on LTC, lenders can responsibly finance projects that might look unbalanced on paper but make strong financial sense in practice.<\/p>\n\n\n\n Not every high-rehab project is fundable or advisable. Be cautious if:<\/p>\n\n\n\n In these cases, the risk outweighs the potential reward. It\u2019s better to walk away than to tie up capital in a deal that doesn\u2019t cash flow or sell profitably.<\/p>\n\n\n\n If you\u2019re submitting a lopsided deal for financing, preparation is everything. Here\u2019s what helps your case:<\/p>\n\n\n\n The more detailed your package, the more likely your lender will see the project\u2019s potential, rather than its risk.<\/p>\n\n\n\n At FACo<\/b><\/a>, we know not every deal fits into a neat box. Our underwriting team specializes in evaluating value-add projects<\/b> where experienced investors can turn challenging properties into profitable outcomes.<\/p>\n\n\n\n We offer:<\/p>\n\n\n\n Whether your project is cosmetic or complex, our goal is the same: to fund deals that make sense and help investors scale sustainably.<\/p>\n\n\n\n A lopsided deal<\/b> isn\u2019t automatically a bad deal. When managed properly, it can be one of the most lucrative types of fix and flips\u2014transforming distressed assets into high-value properties.<\/p>\n\n\n\n The key is preparation, experience, and a lending partner who understands the numbers behind the story.<\/p>\n\n\n\n At FACo<\/b>, we look beyond the surface. If your project\u2019s total cost aligns with its ARV and your team has the experience to execute, we can structure funding that works for both sides.<\/p>\n\n\n\n Because the best flips aren\u2019t always the simplest; they\u2019re the ones where the investor sees potential where others see problems.<\/p>\n\n\n\n Explore your next opportunity with confidence. Visit our homepage<\/b><\/a> or check out our Fix & Flip Loans<\/b><\/a> to learn how we help fund projects of every shape, size, and scope.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":" Not all flips are created equal. Some are clean, cosmetic rehabs\u2014new floors, fresh paint, updated fixtures\u2014and others are full-blown rebuilds that test an investor\u2019s skill and patience. But every so often, a deal comes along where the rehab budget outweighs the purchase price. Maybe you\u2019re buying a distressed property for $100,000, but the renovation will…<\/p>\n","protected":false},"author":1,"featured_media":73063,"menu_order":0,"template":"","class_list":["post-72715","roc_articles","type-roc_articles","status-publish","has-post-thumbnail","hentry"],"acf":[],"yoast_head":"\n\n
Why Lopsided Deals Happen<\/h2>\n\n\n\n
Common Scenarios<\/h3>\n\n\n\n
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<\/b> Homes that have been vacant, vandalized, or neglected for years often need extensive work\u2014new plumbing, electrical, roofing, and structural repairs.<\/li>\n\n\n\n
<\/b> Older homes in desirable areas often need full-system replacements, foundation reinforcement, or compliance upgrades that push budgets higher than the acquisition cost.<\/li>\n\n\n\n
<\/b> Insurance write-offs or damaged properties can sell cheaply but require major remediation and rebuild work.<\/li>\n\n\n\n
<\/b> Investors aiming to completely reimagine the property (new layout, additions, modern systems) will always see rehab costs climb.<\/li>\n\n\n\n
<\/b> Sometimes, investors deliberately buy low in undervalued neighborhoods, knowing they\u2019ll add significant value through premium renovations or reconfigurations.<\/li>\n<\/ol>\n\n\n\nCan Lopsided Deals Work?<\/h2>\n\n\n\n
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How FACo Approaches Lopsided Deals<\/h2>\n\n\n\n
Our Lending Approach<\/h4>\n\n\n\n
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Why Experience Matters More in These Deals<\/h3>\n\n\n\n
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The Role of Loan-to-Cost (LTC) in Lopsided Projects<\/h2>\n\n\n\n
If your total project cost is $300,000 and your loan amount is $255,000, your LTC is 85%<\/b>\u2014well within standard lending thresholds.<\/p>\n\n\n\nWhen a Lopsided Deal Doesn\u2019t Work<\/h3>\n\n\n\n
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How to Strengthen Your Case with the Lender<\/h3>\n\n\n\n
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FACo: Your Partner for Complex Fix & Flip Projects<\/h2>\n\n\n\n
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Final Takeaway<\/h2>\n\n\n\n