The Quick Read: A hard money lender does not use your stepped-up tax basis as the number that sizes the loan; it sizes off the property’s current value, confirmed by its own appraisal or broker price opinion, because an inherited property has no purchase price to treat as cost, and the tax basis only supports your records. The word basis carries three different meanings in this conversation, and mixing them up is a common mistake among heirs.
- Tax basis is a number for your CPA, and it resets to date-of-death value for most inherited property.
- Lender cost basis is purchase price plus rehab, and an inheritance has no purchase price.
- The lender substitutes current as-is value, so equity is appraised value minus any lien.
- Title must be in the heir’s name (or an heirs’ entity) before the property can be pledged.
- Many heirs who hold the property later refinance into long-term DSCR financing, subject to lender guidelines.
The Short Answer: Three Numbers Called Basis
Hard money is asset-based lending. The lender cares about the property, the plan, and the exit. When it talks about basis, it means what you paid. When your CPA talks about basis, it means a tax number. An heir paid nothing, so those two worlds do not line up.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
| Number | Who uses it | What sets it | Changes the loan? |
|---|---|---|---|
| Tax basis | You and your CPA | Value at date of death | No, supports records |
| Lender cost basis | The lender | Purchase price plus rehab | Only where cost applies |
| Appraised value | The lender | Appraisal or BPO today | Yes, drives sizing |
That table is the whole article in miniature. The rest explains how each row works and where the pattern bends.
Key Terms Defined
Basis is the starting number used to measure gain, loss, or cost.
Step-up in basis is the reset of an inherited asset’s tax basis to its value when the owner died.
Loan-to-cost (LTC) is the loan amount as a share of project cost, meaning purchase price plus rehab.
As-is value is what the property is worth today in its current condition.
After-repair value (ARV) is the projected value once planned renovations are finished.
Broker price opinion (BPO) is a lighter valuation, often built from comparable sales, used in place of a full appraisal.
Seasoning is the waiting period a lender wants between acquiring a property and refinancing it.
Vesting is the name or entity that holds legal title on the recorded deed.
What Basis Means for an Heir
Under federal tax law, inherited property generally takes a new basis equal to its fair market value on the date the owner died. The IRS Gifts and Inheritances FAQ says this holds whether or not the estate files a federal estate tax return. The rule exists because the heir receives the asset without inheriting the deferred gain. Fidelity’s explainer on the step-up in basis walks through the concept in plain terms.
Two details matter to investors.
First, the executor may elect an alternate valuation date six months after death. Per the summary of stepped-up basis on Wikipedia, that election is allowed only when it lowers the gross estate value. Most heirs never touch it.
Second, a rental gets a fresh depreciation start. CPA Returns explains that the heir’s depreciable basis is date-of-death value, and the prior owner’s depreciation does not reduce it. Only the building depreciates, not the land, and the schedule runs 27.5 years. That is a real benefit. It is also a tax benefit, entirely separate from how a lender sizes a loan.
Tax treatment varies by situation; consult a qualified tax professional before relying on any of this.
How a Hard Money Lender Actually Sizes the Loan
Here is the step-by-step on the lending side. Across the wholesale network Lendmire works with, the pattern is consistent.
Step 1: Title must exist. The lender needs a recorded deed in the heir’s name or an entity the heirs control. A property still in probate with no heir on title generally cannot be pledged. The estate-level fix comes first.
Step 2: The file gets assembled. Expect the will or trust, court letters, the executor’s deed, and the recorded deed. The lender also wants a title report, a payoff for any existing lien, and a lease or rent roll if the property is rented.
Step 3: Value gets established. The lender orders an appraisal or BPO of its own. A lender wants current value in its own file, so it rarely relies on a report ordered for tax purposes.
Step 4: The cost input gets replaced. Normally the loan is a percentage of purchase price plus rehab, with a second cap tied to ARV. With no purchase price, the cost input in practice becomes as-is value, or documented basis plus any rehab. This is practitioner logic, not a published rule, and individual lenders handle it differently.
Step 5: The loan gets sized. Across the programs we place files with, hard money on a refinance, including cash-out and rate/term, typically runs up to 65% of value. Terms generally run 6 to 18 months, interest-only, and the minimum credit score is typically 620, with extra conditions below 660. Loan sizes reach up to $5,000,000, and smaller balances vary by lender. All of it varies by lender, property, and experience, and nothing is a commitment to lend.
So the equity you can work with is the appraised value minus any lien. The stepped-up basis never enters the formula.
When a Cost Cap Can Apply to an Inherited Property
Cost still matters in two situations.
The first is a rehab. Say an heir inherits a dated rental and plans a full renovation. Fix-and-flip hard money is sized as a share of project cost, and every tier is capped at 75% of after-repair value. By tier, the share is typically 93% of project cost at five or more completed projects, 90% at two or more, and 85% with fewer than two. The top tier is reserved for experienced investors. Up to 100% of the rehab budget can fund in draws against completed work, and that is a rehab-budget figure, never a purchase leverage figure.
For an heir, the project cost starts with as-is value rather than a purchase price. The ARV cap then acts as the ceiling. The more the renovation adds relative to the starting value, the more that cap, not the cost, becomes the limit.
The second situation is a recent purchase of a sibling’s share. If an heir bought out another heir recently, some lenders count that buyout price as cost for the share purchased. The rest of the property still has no cost. Lenders vary on how they blend the two, so expect a conversation with the underwriter rather than a formula.
Title, Probate, and the Seasoning Clock
Probate decides when anyone can lend. Until the court process produces a deed into an heir or an heirs’ entity, there is no borrower with authority to pledge the property.
Once a deed records, the next question is seasoning. For long-term DSCR cash-out refinances, about 6 months is the common expectation across most of the network. Whether the clock for an inherited property starts at the date of death or at the recorded deed varies by lender. The recorded deed is the usual anchor, so ask before you assume. Seasoning is a lender rule, not a law, and a property inherited free and clear still follows each lender’s own overlay.
One more wrinkle. If the estate already refinanced, or you move the property into an LLC, a new seasoning question can open. Title review is also common after an LLC transfer, subject to lender program eligibility.
Date-of-Death Appraisal vs. the Lender’s Appraisal
These are two documents with two jobs.
The date-of-death appraisal fixes the tax basis. It protects you if the basis is ever questioned, and it gives the land-and-building split needed for depreciation. Order it early, because it is much harder to reconstruct later. The executor typically orders it, and the CPA and estate attorney should receive it.
The lender’s appraisal answers a different question: what is this worth today, in this condition, to someone who may need to sell it? The lender orders it. A date-of-death report is stale for that purpose, so it usually cannot double as the lender’s valuation. It still helps as supporting evidence in your file.
“No appraisal” claims in hard money usually mean no full formal appraisal. A BPO or a desktop valuation commonly takes its place. Either way, a valuation of current condition is part of the file.
A Worked Example With Placeholder Figures
Run the numbers on a made-up inherited duplex. These figures are illustrative assumptions, not market data, and carry no program terms.
The decedent paid $150,000 long ago. The date-of-death value was $400,000, so that becomes the heir’s tax basis. Later, the lender’s appraisal comes in at $430,000.
Tax side. If the heir sold at $430,000, the taxable gain would be about $30,000 before selling costs. Without the step-up, it would be $280,000. This is why many heirs hold or refinance instead of rushing to sell.
Loan side. A hard money refinance is sized as a percentage of the $430,000 appraisal, up to the 65% refinance ceiling in the network’s typical programs. The $400,000 tax basis and the $150,000 original cost do not drive the number. If a lien exists, it comes out of the proceeds first.
Two basis figures, one appraised value, and the loan follows the third.
The Multi-Heir Buyout
Siblings often inherit together, and one wants to keep the house. A hard money loan to the keeping heir can fund the buyout of the others. The lender reviews the property’s rental income, the plan, and the exit, and each of those matters.
Practical points:
- Agree on value. An independent appraisal that all heirs accept avoids disputes. Separate counsel for each heir is common.
- Expect refinance-style sizing. A buyout of inherited shares usually gets treated like a refinance sized off appraised value, which is why that lower ceiling applies. Lenders vary.
- Know your two bases. The keeping heir’s inherited share carries date-of-death basis. The share bought from siblings carries what the heir paid for it. A later sale blends the two, and your CPA should work that out.
Many investors who stabilize the property then refinance out of hard money into long-term DSCR investor loans, which Lendmire brokers.
Where the General Rule Breaks
The rule that value drives the loan holds nearly everywhere. These are the named exceptions.
Estate tax return filed. If the estate filed a federal estate tax return, a consistency rule can cap the heir’s basis at the value reported there. Advice Only’s glossary entry on basis consistency notes the cap applies only to property that increased estate tax. Most estates are below the filing level. Check with the executor’s CPA before you report a number higher than the estate’s.
Gifts are not inheritances. A gifted property generally carries the donor’s adjusted basis, with no step-up. Heirs sometimes assume otherwise.
Step-down. If the property was worth less at death than the decedent’s basis, the basis can reset downward. It is rarer, but it does happen.
One-year reacquisition. Property you gave the decedent within a year before death generally does not step up when it returns to you.
Probate not closed. No heir has title, so no loan works until the estate resolves it.
Seasoning anchor. Death date versus recorded deed varies by lender, as covered above.
Document Checklist
Gather these before you call a lender:
- Death certificate and court letters
- The will or trust, plus the executor’s deed
- The recorded deed in the heir’s or entity’s name
- A title report and any lien payoff statements
- The date-of-death appraisal, if one exists
- The lease or rent roll for a rented property
- A renovation scope and budget, if rehab is planned
Common Mistakes
Assuming the step-up raises the loan. It raises your tax basis. The loan follows current value.
Skipping the date-of-death appraisal. A guess, an online estimate, or a tax assessment is weak support if the basis is questioned later.
Treating the old depreciation as continuing. The prior owner’s schedule ends at death, and a new one starts on the building’s stepped-up value.
Moving the property into an LLC too early. It can trigger title review or a seasoning reset.
Believing inherited property has no seasoning anywhere. Many DSCR lenders set their own overlays.
The Investor Decision in Practice
The choice usually comes down to selling, holding, or refinancing. Selling at a value near the stepped-up basis produces little taxable gain, though growth after death is taxable. Holding keeps the asset. A hard money loan fits when you need short-term capital for a rehab or a buyout and have an exit planned.
If you plan to hold the property as a rental, long-term DSCR financing is the usual exit. On a standard rental, cash-out typically tops out around 75% of value, and coverage of 1.00 is where many select programs start. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Clearing 1.00 is not the same as positive cash flow, since repairs, vacancy, and management sit outside the calculation. The complete DSCR loans guide covers how that math works. For a flipper’s other exits, see Lendmire’s piece on how a DSCR lender counts five hard money exits from a flipper.
If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals.
What to Bring to Your CPA
- Was a federal estate tax return filed, and what value did it report?
- Who orders the date-of-death appraisal, and who receives it?
- How should the land and building be split for depreciation?
- If I buy out siblings, how does my blended basis work?
- Did the decedent give any of this property away in the year before death?
Frequently Asked Questions
Does a step-up in basis increase my hard money loan?
No. The step-up changes your tax numbers, not the lender’s. The loan is sized on current value from the lender’s own appraisal or BPO, and the stepped-up basis is background documentation.
Do I need a date-of-death appraisal to get a loan?
Usually not for the loan itself. Lenders typically order their own current valuation. The date-of-death appraisal is still worth having for tax records and for the land-and-building split, and it can support your file.
Can I borrow before probate closes?
Generally not against the property. A lender needs a recorded deed in an heir’s name or an heirs’ entity. If title still sits in the estate, resolve that first with the estate attorney.
What if there is no purchase price?
The lender replaces cost with as-is value, or with documented basis plus rehab if you are renovating. Expect an appraisal or BPO to set that figure. Details vary by lender, property, and experience.
Does a sibling buyout reset my basis?
Not for the share you inherited. That share keeps its date-of-death basis. The share you buy generally carries your purchase price. Your CPA should calculate the blend.
About Lendmire
Lendmire, NMLS# 2371349, is a non-QM mortgage broker serving real estate investors in 41 markets, including Washington, D.C., through DSCR investor loan programs. Qualification is generally reviewed around the subject property’s rental income, not the borrower’s W-2 history — a practical fit for LLC-titled portfolios and self-employed investors. All scenarios remain subject to lender review and program guidelines. Two consecutive Scotsman Guide Top Mortgage Workplace recognitions (2025, 2026).
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References
1. IRS Gifts and Inheritances FAQ
2. Fidelity Learning Center: What Is Step-Up in Basis
3. Wikipedia: Stepped-up basis
4. CPA Returns
5. Advice Only: Basis Consistency Rules
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a DSCR Loan Use Market Rent for an Inherited Tenant? · How Much a DSCR Cost-Basis Refinance Returns Under Six Months · Should a BRRRR Investor Exit Hard Money on a Low Cash-Out Refinance?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.