Nashville’s growth over the past decade has turned many of its older neighborhoods into active renovation markets. Mid-century ranches, small bungalows and dated brick homes in established areas give investors a steady supply of properties that can be bought, improved and resold or rented.
Financing those projects well is just as important as finding them. Here is how fix-and-flip loans work for Nashville-area investors, and what local costs and rules to plan for.
How Fix-and-Flip Financing Works
A fix-and-flip loan is short-term, business-purpose financing that covers the purchase of an investment property and some or all of the renovation. The renovation money is held back at closing and released through draws as work is completed and inspected.
On qualified deals, high-leverage programs can finance:
- Up to 100% of the purchase price
- Up to 100% of the renovation budget
- Up to 75% of after-repair value (ARV), which caps the total loan
The 100/100 program starts at a 600 credit score and one completed project, with verified liquidity of 10% of the rehab or construction budget plus 6 months of payments, third-party fees and closing costs. Read Can You Get 100% Financing for a Fix-and-Flip? for the full picture.
A Nashville Example
| Item | Amount |
|---|---|
| Purchase price | $310,000 |
| Renovation budget | $70,000 |
| Total project cost | $380,000 |
| Projected ARV | $525,000 |
| 75% of ARV | $393,750 |
Here the full purchase and rehab fit under the ARV cap. But in a higher-priced market, a modest change in ARV moves the numbers quickly. At an ARV of $480,000, the cap falls to $360,000, leaving a $20,000 gap to cover. That is why a well-supported ARV is so important in Nashville.
Nashville-Specific Considerations
Comps vary block by block
Values in Nashville can change sharply between neighboring streets, especially where new construction sits next to original homes. When estimating ARV, compare your finished house to renovated homes of similar age and size, not to new tall-and-skinny builds nearby. Our guide on how to estimate ARV walks through the process.
Metro Codes permitting
In Davidson County, building permits run through Metro Nashville’s Department of Codes and Building Safety. Applications are reviewed for zoning, and many projects also need sign-off from other Metro agencies such as Water and Sewer, Stormwater, Planning or Historic. Electrical, plumbing and mechanical work require separate trade permits pulled by licensed subcontractors.
Before you buy, check:
- Whether the property sits in a historic or conservation overlay, which can limit exterior changes
- Whether past additions or conversions were permitted
- What permits your scope will need and how long reviews are running
Unpermitted work can slow down the appraisal, the sale and your lender’s draw inspections.
Tennessee recordation taxes
Tennessee charges a realty transfer tax of $0.37 per $100 of the purchase price and a mortgage (indebtedness) tax of $0.115 per $100 of the loan amount, with the first $2,000 of debt exempt. On a $380,000 loan, the mortgage tax works out to roughly $435. These are typically paid at closing, so include them in your cash-to-close estimate.
Outside Davidson County
Many investors also work in surrounding counties like Rutherford, Williamson, Wilson and Sumner. Each has its own permitting office and timelines, so check local rules for every new area you buy in.
Tips for a Smoother Nashville Flip
- Get a detailed scope early. Older homes often hide foundation, electrical or plumbing issues. Have your contractor walk the property before you finalize the budget.
- Build in contingency. Labor and materials in a busy market can run over.
- Plan your carrying costs. Interest, insurance, utilities and taxes add up if the project or sale takes longer than expected.
- Have a backup exit. If the resale market softens, could the property work as a rental? A BRRRR refinance into a DSCR loan may be an option.
Price Your Nashville Deal
Run your purchase price, rehab budget and ARV through the 100% Financing Calculator to see your estimated loan and cash requirement. Learn more about our 100% fix-and-flip financing, or submit your deal for a preliminary review.
Sources: Metro Nashville Building Permit Process, Tennessee Department of Revenue: Recordation Tax Rates.
Disclosure
Borrowers Capital LLC provides access to business-purpose real estate financing through correspondent and private lending channels. Program availability, leverage, pricing, fees, loan amounts and approval requirements vary by transaction and are subject to applicable lender guidelines, borrower and property eligibility, valuation, due diligence, underwriting and final approval. References to 100% financing describe the potential financing of eligible project costs and do not guarantee a zero-cash transaction or loan approval. Borrowers Capital LLC may receive compensation in connection with arranging a transaction. This article is general information and does not constitute a commitment to lend, an offer of credit, or financial, legal or tax advice.