Fix and Flip Construction Loans in Texas: 2025 Guide for 1-4 Unit Rentals

As the Texas real estate market continues to grow, investors are increasingly seeking opportunities in 1-4 unit properties—single-family homes, duplexes, triplexes, and fourplexes. Whether you’re an experienced real estate investor or a first-time buyer, understanding fix and flip loans, construction loans, DSCR loans, and hard money financing in Texas is crucial for success in the 2025 market. This comprehensive guide delves into loan types, lender options, application steps, and key regional insights—empowering you to maximize profits and minimize risks.

2025 Texas Residential Investment Market Overview

Texas stands out with robust population growth, strong job markets, and investor-friendly regulations. Real estate prices in metro areas like Dallas-Fort Worth, Houston, Austin, San Antonio, and up-and-coming regions such as Waco, Lubbock, and Corpus Christi are attracting both local and out-of-state investors eager to pursue fix and flip and value-add strategies.

• Dallas-Fort Worth (DFW): Fastest-growing metro for single-family and small multi-unit rehabs. Neighborhoods like Bishop Arts, East Dallas, and Grand Prairie offer high renovation ROI.
• Houston: Inner Loop neighborhoods (Heights, Montrose) and emerging suburbs (Spring, Pearland) have strong rental and resale demand.
• Austin: Zilker, East Austin, and Round Rock among the top for 1-4 unit rehabs due to tech sector expansion and population inflow.
• San Antonio: Downtown, Alamo Heights, and Stone Oak offer affordable entry points with reliable appreciation trends.
• Waco: Recently popularized by renovation TV shows, is seeing a rise in demand for revitalized small multifamily properties.
• Lubbock and College Station: High rental demand due to major universities—perfect for 1-4 unit buy & hold or flip strategies.
• Corpus Christi: Vacation property flips are growing—single-family and duplexes near beaches command premium rates post-rehab.

Key Loan Options for 1-4 Unit Rental Property Investors

Investors in Texas have a range of capital sources for purchase, rehab, or new construction of 1-4 unit rentals:

Need capital? GHC Funding offers flexible funding solutions to support your business growth or real estate projects. Discover fast, reliable financing options today!

Test Your Expertise: The Complexities of the 1031 Exchange

As a sophisticated real estate investor, you understand that the 1031 Exchange is a cornerstone strategy for tax deferral and wealth accumulation. But beyond the basics, the intricacies of the 1031 Exchange rules can pose significant challenges. This quiz is designed to test your in-depth knowledge and highlight critical nuances that separate casual investors from true experts in 1031 Exchange transactions.

Instructions: Choose the best answer for each question.

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Question 1: Understanding "Like-Kind" in a 1031 Exchange

Which of the following scenarios most likely qualifies as a like-kind property exchange under IRS Section 1031, allowing for 1031 Exchange tax deferral?

a) An investor exchanges a portfolio of publicly traded REIT stocks for a commercial retail building. b) An investor exchanges their primary residence, used for personal living for 15 years, for a duplex intended for rental income. c) An investor exchanges raw land held for appreciation in Texas for a stabilized apartment complex in Florida, both held for investment. d) An investor exchanges a classic car collection (personal property) for a single-family rental home (real property).

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Question 2: Navigating the 45-Day Identification Period for a 1031 Exchange

An investor sells a multi-family property on June 15th for a 1031 Exchange. According to the strict timelines, by what date must they identify their replacement properties to comply with the 1031 Exchange requirements?

a) July 30th of the same year, as the 45-day period includes weekends and holidays. b) August 29th of the same year, allowing for an extra 45 days if needed. c) December 12th of the same year, aligning with the 180-day completion period. d) January 1st of the following year, if they plan to file for an extension.

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Question 3: The Role of a Qualified Intermediary (QI) in a 1031 Exchange

Why is the engagement of a Qualified Intermediary (QI) absolutely critical for the validity of a 1031 Exchange?

a) The QI provides investment advice and helps the investor choose the best replacement property for their 1031 Exchange strategy. b) The QI acts as a liaison with the IRS, directly negotiating tax liabilities related to the 1031 Exchange process. c) The QI holds the proceeds from the relinquished property's sale, preventing the investor from having "constructive receipt" of funds, which would invalidate the 1031 Exchange. d) The QI provides legal and tax advice to ensure the 1031 Exchange is perfectly compliant

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Question 4: Understanding "Boot" and its Impact on a 1031 Exchange

An investor sells a commercial building with $500,000 in equity for a 1031 Exchange. They purchase a replacement property for $450,000, effectively reducing their debt by $50,000. What is the tax implication of this scenario within the 1031 Exchange framework?

a) The entire 1031 Exchange is disqualified because the investor "traded down" in value. b) The $50,000 in reduced debt is considered "boot" and will be immediately taxable as partial gain in this 1031 Exchange. c) There are no immediate tax implications, as the primary goal of the 1031 Exchange is only about the "like-kind" nature of the properties. d) The investor can defer the $50,000 as long as they pay off other personal debts with the funds, still qualifying for a full 1031 Exchange.

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Question 5: Advanced 1031 Exchange Strategies & Flexibility

An investor aims to sell a highly appreciated single-tenant retail property and replace it with multiple smaller, diversified multi-family units to spread risk. Which of the following 1031 Exchange identification rules best allows for this diversification strategy, maintaining eligibility for a 1031 Exchange?

a) The "Three Property Rule," where the investor can identify up to three properties of any value, regardless of the relinquished property's value, for their 1031 Exchange. b) The "200% Rule," allowing identification of any number of properties, provided their aggregate fair market value does not exceed 200% of the relinquished property's value for the 1031 Exchange. c) The "95% Rule," which states that if more than three properties are identified, the investor must acquire at least 95% of the aggregate value of all identified properties to qualify for the 1031 Exchange. d) All of the above are valid identification rules within a 1031 Exchange, offering flexibility for various investment strategies.

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The Ultimate DSCR Loan for Rental Property Quiz

Are you looking to expand your real estate investment portfolio? A DSCR loan might be the perfect tool to help you achieve your goals without relying on traditional income documentation. Test your knowledge with this quiz to see if you're ready to master the intricacies of a DSCR loan for rental property.

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Page 1 of 5

What is the primary factor a lender considers when approving a DSCR loan for rental property? A) The borrower's personal income and debt-to-income (DTI) ratio. B) The borrower's credit score and employment history. C) The property's potential rental income compared to its monthly expenses, known as the Debt Service Coverage Ratio. This is the key metric for a DSCR loan for rental property eligibility and approval. D) The total value of the borrower's existing investment properties and personal savings.

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How does a DSCR loan for a rental property differ from a conventional mortgage for a personal residence? A) A conventional mortgage requires a DSCR calculation, whereas a DSCR loan for a rental property does not. B) A DSCR loan for a rental property primarily focuses on the property's cash flow, allowing investors to qualify without traditional income verification, unlike a conventional mortgage which is based on personal income and liabilities. C) A conventional mortgage has a higher interest rate and stricter requirements than a DSCR loan for a rental property. D) A DSCR loan for a rental property is only available for commercial properties, not residential rental properties.

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What is an ideal Debt Service Coverage Ratio (DSCR) for a lender when evaluating a DSCR loan for a rental property? A) A DSCR of 0.75, indicating the property generates 75% of the income needed to cover its debt service. B) A DSCR of 1.00, meaning the property's income exactly equals its debt service. C) A DSCR of 1.25 or higher, as this indicates the property's income is greater than its expenses, making it a strong candidate for a DSCR loan for a rental property and providing a buffer for unexpected costs. D) A DSCR of 2.00, which is the standard minimum for all investment properties, regardless of location or market conditions.

Page 4 of 5

Which of the following expenses are typically included in the calculation of the Debt Service Coverage Ratio for a DSCR loan for a rental property? A) The property's mortgage payment (principal and interest), property taxes, and insurance, which are the core components used to determine if the property can support the debt. B) The property's mortgage payment, property taxes, insurance, and the borrower's personal credit card debt. C) The property's monthly rental income and all utility bills, regardless of who pays them. D) Only the principal and interest payment of the loan, as other expenses are not considered in a DSCR loan for a rental property calculation.

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Who would most benefit from using a DSCR loan for a rental property? A) A first-time homebuyer with a W-2 salary and a high debt-to-income ratio, who is looking to purchase a primary residence. B) A seasoned real estate investor with multiple properties who wants to expand their portfolio without using personal income to qualify, making a DSCR loan for a rental property the ideal financing solution for their needs. C) Someone looking to finance a primary residence with a low down payment and a government-backed loan. D) An individual with a very low credit score who cannot qualify for any other type of loan.

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1. Fix and Flip Loans

• Short-term, interest-only loans for acquiring and renovating properties.
• Terms: 12-24 months, loan amounts from $75,000 to $500,000+ per unit.
• Up to 90% LTV on purchase and 100% of rehab costs (subject to max ARV, typically 70-75%).

2. Construction Loans

• For ground-up builds or major structural rehabs.
• Often structured as interest-only during construction, then converting to a permanent mortgage (“construction-to-perm” loans).
• Loan amounts generally $100,000-$1,000,000 for 1-4 unit rental properties.

3. Rehab Loans

• Targeted at properties needing repairs rather than full redevelopment.
• Often bundled with purchase loans or available as second-position ‘rehab only’ financing.
• Draw schedules based on project milestones, with lender inspections to verify progress.

4. Hard Money Loans

• Fast-closing, asset-based loans with streamlined underwriting.
• Ideal for investors with less experience or non-traditional income streams.
• Rates: typically 8-12% in 2025, points: 1-3% of loan amount.

5. DSCR Rental Loans

• For stabilized 1-4 unit rentals. Approval based on property’s cash flow, not borrower income or DTI.
• 30-year fixed or adjustable-rate options, often eligible for cash-out refi post-renovation.
• Minimum DSCR: usually 1.1-1.25x. Rates in Texas: 7.25-8.5% for most investors in early 2025.

Top Lenders for Texas 1-4 Unit Fix & Flip and Construction Loans (2025)

Each of these lenders offers specialized programs for both experienced and first-time investors. Contact each directly for current rates and state-specific guidelines.

• Lima One Capital – Active in all Texas metros, offers fix & flip, new construction, rental, and rehab loans up to $1MM. Streamlined approvals and flexible draw schedules.
• RCN Capital – National lender with fast approval, Texas-specific programs, and both fix and flip and DSCR rental loans for 1-4 units.
• Kiavi (formerly LendingHome) – Known for digital applications, quick pre-approval, and competitive rates on flips and rentals throughout Texas.
• Longhorn Investments – Texas-based hard money lender. Local market expertise; flexible on credit requirements and property condition.
• Finance of America Commercial – Nationwide programs available in Texas, specializes in construction-to-perm and long-term DSCR rental loans for 1-4 units.
• Temple View Capital – Active in all Texas markets, great for larger duplex/triplex/fourplex value-add projects and mid-size construction loans.

Step-by-Step Application Process for Texas Rental Property Construction or Rehab Loans

1. Define the Project Scope: Identify target property and investment strategy—fix & flip, ground-up construction, or value-add rental.
2. Select the Right Lender and Loan Type: Compare lender products based on your experience, timeline, and funding needed.
3. Prepare Required Documentation:
   • Loan application
   • Purchase contract or proof of ownership
   • Detailed renovation/construction budget and scope of work (SOW)
   • Contractor bids, if required
   • Personal identification and entity documentation (if applicable)
   • Exit strategy (sale, refi, or rental hold)
4. Submit Application and Underwriting:
   • Lender orders appraisal (as-is and ARV or as-completed value)
   • Credit/background check varies by lender; often lighter for hard money.
   • Review of experience and financial reserves, especially for larger projects or new construction.
5. Loan Approval and Closing: Upon approval, loan docs are signed, and escrow funds are issued. Rehab/construction draw schedules are established.
6. Renovation or Construction Phase: Funds for work are released in draws as milestones are completed—verified by lender inspections.
7. Exit or Permanent Financing: Upon completion, investors can sell (“flip”) or refinance into a DSCR rental loan for long-term cash flow.

2025 Real Success Stories: Fix and Flip & Construction Loans for 1-4 Units in Texas

Single-Family Fix & Flip in Austin

• Loan: $255,000 from Kiavi, 80% purchase, 100% rehab (up to $70,000).
• Neighborhood: East Austin
• Timeline: 8-month project, sold at 140% of purchase price.
• Terms: 10% interest-only, 2 points, no prepayment penalty.

Duplex Conversion in Dallas-Fort Worth

• Loan: $420,000 loan from Lima One Capital, blended for construction and a short-term rental DSCR refi.
• Neighborhood: Bishop Arts
• Project: Historic SFR converted to legal duplex, total build time 14 months.
• DSCR refi rate: 7.8%, 30-year amortization (property cash-flowed at 1.34x DSCR).

Triplex Rehab in Houston Heights

• Loan: $350,000 hard money loan from Longhorn Investments. 80% of costs; major structural renovations.
• Exit: Sold to cash buyer within 9 months; 16% profit after renovation and closing costs.

Fourplex Ground-Up Build in San Antonio

• Loan: $600,000 construction-to-perm from Finance of America Commercial (85% LTC, 70% ARV cap).
• Terms: 12-month construction at 9%, then converts to 7.6% DSCR rental loan.
• Neighborhood: Alamo Heights; fully leased within 3 months of completion.

2025 Texas Residential Loan Market Trends & Tips

• Speed Matters: Most winning offers in Texas cities come from buyers with pre-approvals or hard money commitments.
• Rising Construction Costs: Budget conservatively for labor and materials; lenders may require contingencies in your SOW.
• Value-Add Focus: Investors are prioritizing properties with clear paths to increased rents or sales price through cosmetic or structural improvement.
• Local Partnerships: Many lenders work faster with Texas-based contractors/appraisers familiar with regional codes and processes.
• Stabilization = Refinance: Plan to transition from a higher-cost fix & flip or construction loan to a “permanent” DSCR rental mortgage once tenants are in place.
• Regulatory Watch: Texas remains landlord- and investor-friendly, but always verify local permitting, zoning, and rental guidelines (especially in Austin and Dallas).

Conclusion

Navigating Texas fix and flip and construction loans for 1-4 unit rentals in 2025 requires market knowledge, strong partners, and understanding of available lending products. From single-family flips in Austin to fourplex builds in San Antonio, leveraging the right financing can open doors to substantial returns and long-term portfolio growth. Partner with reputable Texas lenders, work with experienced contractors, and always stay updated on changing local and state market trends.

✅ Small Business Resources 

• SBA – Small Business Administration
  https://www.sba.gov

• SCORE Mentors (Free Mentoring & Workshops)
  https://www.score.org
• Small Business Development Centers (SBDC)
  https://americassbdc.org

Are You an SBA Real Estate Loan Expert?

Test your in-depth knowledge on using SBA Loans for owner-occupied commercial Real Estate acquisition. These questions delve into the critical details that can impact your business's growth and financial strategy.

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Page 1 of 5

For an existing commercial property, what is the minimum owner-occupancy percentage required for an SBA 7(a) real estate loan, and does this specific scenario qualify?

A manufacturing company plans to acquire a 30,000 sq ft industrial real estate facility using an SBA 7(a) Loan. The company initially needs 18,000 sq ft for its operations and intends to lease out the remaining 12,000 sq ft.

A) 60%; Yes, it qualifies. B) 51%; Yes, it qualifies. C) 75%; No, it does not qualify. D) 60%; No, it does not qualify, as they are leasing out a portion.

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Which of the following sets most accurately represents additional cost categories that can typically be financed within an SBA 504 Loan for a commercial real estate project?

Hint: Beyond the straightforward purchase of a commercial real estate property, an SBA 504 Loan is highly effective for comprehensive projects.

A) Business inventory, working capital, and employee salaries. B) Building renovations, long-term machinery essential to operations within the property, and soft costs like architectural fees. C) Advertising expenses, short-term equipment leases, and utility deposits. D) Personal real estate investments, vehicles for personal use, and stock market investments.

Page 3 of 5

Between an SBA 7(a) Loan and an SBA 504 Loan, which program generally offers the lowest typical borrower down payment for a commercial real estate acquisition, and what is that common minimum percentage for established businesses?

A highly profitable professional services firm in a competitive market wants to purchase its office real estate with minimal upfront capital. The firm's owners prioritize cash flow and liquidity.

A) SBA 7(a) Loan; 15% B) SBA 504 Loan; 10% C) SBA 7(a) Loan; 5% D) SBA 504 Loan; 20%

Page 4 of 5

For new construction, what is the initial minimum owner-occupancy percentage required, and what is the maximum timeframe to meet the full owner-occupancy threshold, for an SBA Real Estate Loan?

A fast-growing tech startup plans to construct a new 50,000 sq ft headquarters using an SBA Loan. They will immediately occupy 35,000 sq ft and have a definitive plan to occupy the remaining 15,000 sq ft within two years as their team expands.

A) Initial 51%, full 80% within 5 years. B) Initial 60%, full 80% within 3 years. C) Initial 75%, full 100% within 1 year. D) Initial 51%, full 100% within 2 years.

Page 5 of 5

What is this crucial requirement, and what fundamental principle does it underscore for the lender?

When securing an SBA Loan for a commercial real estate purchase, principal owners with a 20% or greater ownership stake are almost universally required to provide a specific type of assurance beyond the collateral of the real estate itself.

A) A fixed-rate interest payment commitment, demonstrating long-term stability. B) A first-lien position on all personal assets, ensuring full recovery. C) A personal guarantee, signifying the owners' personal commitment to loan repayment. D) A business plan with projected revenue growth of at least 15% annually, showing future viability.

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Ready to get started? Prequalify today with a Texas-focused fix & flip lender and capitalize on the state’s booming 2025 investment market!

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✅ Real Estate Investor Resources

• AirDNA (Short-Term Rental Data)
  https://www.airdna.co

• Rentometer (Rent Comps)
  https://www.rentometer.com
• Zillow Research & Data
  https://www.zillow.com/research

DSCR Loan IQ Quiz!

Test your knowledge of Debt Service Coverage Ratio (DSCR) loans!

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Page 1 of 3

What is the primary factor a lender focuses on when approving a DSCR loan for an investment property? a) The borrower's personal debt-to-income (DTI) ratio b) The property's ability to generate enough income to cover its mortgage payments c) The borrower's credit score history over the past 10 years d) The total number of investment properties the borrower already owns

Page 2 of 3

If a property has a Net Operating Income (NOI) of $5,000 per month and its total monthly debt service (PITI) is $4,000, what is its DSCR? a) 0.8x b) 1.0x c) 1.25x d) 5.0x

Page 3 of 3

Which type of borrower most commonly benefits from using a DSCR loan? a) First-time homebuyers purchasing a primary residence b) Investors with a strong W-2 income and minimal tax deductions c) Self-employed individuals or those with complex income who want to avoid traditional income verification d) Homeowners looking to refinance their primary residence for a lower interest rate

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GHC Funding DSCR LOAN, SBA LOAN, BRIDGE LOAN

Contact GHC Funding Today. Main: 833-572-4327 Email: sales@ghcfunding.com

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