The Quick Read: A hard money lender sizes a flip loan on two tests at once: a share of project cost and a cap tied to after-repair value (ARV), and the smaller result sets the loan. The network figures below vary by lender, property, and experience, and nothing here is a commitment to lend.
- Loan-to-cost runs 85% of project cost with fewer than 2 completed projects, 90% at 2+, and 93% at 5+.
- Every tier is capped at 75% of ARV.
- Up to 100% of the rehab budget funds in draws against completed work. It is not a purchase LTV.
- Terms run 6-18 months, interest-only, with no prepayment penalty.
- Credit starts at a 620 minimum score, with added conditions below 660.
What Is After Repair Value, and Why Does the Loan Sit on It?
ARV is the estimated sale price of the property once the work is finished. It is not today’s as-is value. Bankrate describes it as what the house will likely sell for after it is fixed.
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.
Lenders size on ARV because the finished property is the collateral they are really lending against. The house is a shell at closing. The exit is a sale or a refinance of the finished product. So the cap follows the finished value, and the lender watches how far the loan climbs against it.
ARV is not the as-is value plus the rehab budget. An appraiser’s explanation of as-is versus as-repaired value separates the current value from the “subject to” completion value, and notes the market does not always repay renovation dollar for dollar. A $60,000 rehab does not automatically create $60,000 of value. Comps decide.
How Does Underwriting Turn ARV Into a Loan Amount?
The loan is the lesser of two figures: the loan-to-cost amount and the ARV cap. Across the wholesale network, loan-to-cost depends on documented completed projects. The ARV cap is 75% at every tier. Whichever test is tighter on a given deal limits the loan.
Walk through it in order.
1. Add up project cost. Purchase price plus rehab budget. This is the base for the cost test.
2. Apply the experience tier. Fewer than 2 completed projects gets 85% of project cost. Two or more gets 90%. Five or more gets 93%. The top tier is reserved for experienced investors, and every figure varies by lender, property, and experience.
3. Apply the ARV cap. Multiply the ARV by 75%. That is the ceiling no matter how strong the borrower is.
4. Take the smaller number. That is the maximum loan. The gap between it and total cost is cash the investor brings.
5. Split the loan into two buckets. Part funds the purchase at closing. The rehab portion sits in holdback and funds in draws. Up to 100% of the rehab budget can fund in draws against completed work.
Here is how the limiting constraint flips. Say an investor buys a modest property with a light cosmetic scope and a strong ARV. Cost is low against the finished value, so the cost test limits the loan. Now take a deal where the purchase is aggressive and the ARV is thin. Project cost climbs toward the ARV, the 75% cap binds first, and the investor brings more cash than the tier percentage suggests. Same borrower, different limiting number.
The tier percentages look generous. The ARV cap is what quietly takes cash back.
The 70% Rule Is Not the Lender’s Cap
Investors mix these up constantly. The 70% rule is a screen for your maximum purchase price: ARV times 0.70, minus repairs, per Bankrate’s explainer. It is the investor’s offer math.
The lender’s cap is a share of ARV, and on this network that share is 75%. Different tools, different jobs. One tells you what to offer. The other tells you what the loan can be.
The rule’s 30% margin already has to cover holding costs, financing, closing, and profit. Real Estate Skills calls subtracting holding costs again double counting. The same source says the percentage can shift by market: cheaper, slower-selling homes may need a lower share, and fast-selling higher-priced markets may support a higher one. Use it as a screen, then let the actual comps and the lender’s sizing have the final word.
How Is ARV Actually Determined?
ARV comes from comparable renovated sales, adjusted for size, bedroom and bath count, location, and condition. The operative word is renovated. Comps of unrenovated houses say what the property is worth now. They say nothing about the finished number.
Underwriters read the comp set for four things:
- Recency and proximity. Sales close to the subject, in the same market, that sold recently enough to reflect today’s buyers.
- Matching finish level. If your plan is a mid-grade kitchen, the comps need mid-grade kitchens. A luxury comp inflates the number.
- Matching size and layout. Square footage, bedrooms, and baths set the adjustments.
- Honest adjustments. Every difference gets a dollar adjustment, and big ones get scrutiny.
An independent valuation, not the borrower’s estimate, usually decides the figure the lender uses. That is why a self-built ARV is a planning tool, not an approval.
Finish-level consistency is where files go wrong. Over-improving a modest street makes the house the nicest one for blocks, and buyers don’t pay for that. Under-improving leaves it below the comp set. Either way the number the appraiser lands on drifts from the plan.
What Happens If the Appraisal Comes In Low?
The loan shrinks and the investor’s cash requirement grows. Because the ARV cap sits at 75%, every dollar of ARV lost removes 75 cents of the ceiling. If the cap was the limiting test, the loan drops one-for-one with that math. If the cost test was limiting, a small miss may change nothing.
The options are the usual four:
- Renegotiate the purchase price. A lower price lowers project cost and narrows the gap.
- Trim the scope. Cut work the comps don’t reward.
- Bring more cash. Fine if the profit still holds at the lower ARV.
- Walk away. Sometimes the right answer. A flip that only works at your ARV doesn’t work.
Build a conservative and an optimistic ARV before you apply. Run the deal at the conservative one. If it still pencils, the appraisal risk is tolerable.
Cash You Need at Closing
Cash is the gap between total cost and the loan, plus costs outside the loan. Many investors underestimate this. “100% rehab funding” does not mean zero cash.
Three pieces matter:
- The equity gap. The difference between project cost and the loan, set by the tier percentage or the ARV cap, whichever binds.
- Closing costs and prepaid interest. These need cash. Terms are interest-only, so the carry runs throughout the project.
- Reserves and liquidity. Lenders look at whether the borrower can absorb surprises. Thin liquidity is a common reason a decent deal gets stuck.
Rehab funding has a separate quirk. The 100% figure applies to the rehab budget, funded in draws against completed work, not to the purchase. Many lenders reimburse work already done, so the borrower often floats the first draw. Per-draw inspection fees vary by lender.
Who Qualifies: Credit, Experience, and Documents
Underwriting stays asset-based. The lender looks at the property, the plan, and the exit before the borrower’s personal profile. Credit still counts. The network minimum is a 620 score, with additional conditions below 660. First-time investors can qualify at the lower leverage tiers.
Experience drives leverage. Here is the whole structure in one view:
| Borrower tier | Loan-to-cost | ARV cap |
|---|---|---|
| Fewer than 2 completed projects | 85% of project cost | 75% |
| 2+ completed projects | 90% of project cost | 75% |
| 5+ completed projects | 93% of project cost | 75% |
All figures vary by lender, property, and experience. A first flip is a real path, just with more cash in the deal.
A typical deal package includes:
- The purchase contract
- Scope of work and budget, line by line
- The comps behind your ARV
- Entity documents if buying in an LLC, subject to lender program eligibility
- Experience documentation, such as prior settlement statements
- Proof of liquidity
- Your exit plan
Investors who submit ARV, repair detail, how repairs get funded, and the comps they used give underwriters fewer open questions. Incomplete budgets and missing comps are the ordinary reasons files stall.
Property, Scope, and Loan Size
Eligible collateral is non-owner-occupied residential, 1-4 units. Ground-up construction runs to 10 units. Commercial, industrial, land or lots, hospitality, and owner-occupied properties are not offered.
Loans go up to $5,000,000, larger by exception, and smaller balances vary by lender. Terms run 6-18 months, interest-only, with no prepayment penalty. There are no multi-year options on this program. An investor who needs longer runway plans a refinance into long-term rental financing instead.
Scope matters as much as size. Cosmetic flips carry short timelines. Structural or heavy rehabs run longer and draw more questions. The lender weighs whether your budget and timeline are realistic, and 18 months is the outer edge of the term.
How Do Draws Work?
Most of the rehab budget is held back and released in draws after inspection. The draw count and amounts are agreed up front. These terms are contractual, not set by a regulator, so read them before you sign.
In practice:
1. At closing, the purchase portion funds and the rehab sits in holdback. Some lenders release a first increment.
2. The investor completes a phase of work and pays the contractor.
3. An inspection confirms the work.
4. The lender reimburses that phase.
5. Repeat until the budget is spent.
The cash-flow gap is the problem. If you pay contractors before the reimbursement lands, you are financing the project in between. Ask each lender how it handles stored materials, whether it advances money at closing, and what inspection and wire fees apply. Lendmire’s hard money draw schedule rules page covers the mechanics in more detail.
Where the Exit Fits
These are short-term, interest-only loans repaid by sale or refinance. Underwriters want to see the exit before they fund. For a sale, that means comps supporting the list price and a realistic marketing window. For a hold, it means a rental that can carry long-term financing.
Many investors refinance out of hard money into a DSCR loan once the property is stabilized, and Lendmire brokers that path. DSCR compares rent to the full housing payment, and it is a separate test from the flip’s ARV. Still, the flip’s ARV and the later appraised value should tell a consistent story. See the complete DSCR loans guide for how that second loan is underwritten.
Where the General Rule Breaks
- No true 100% purchase program. The 100% applies to rehab draws. Purchase leverage is capped by tier and ARV.
- Experience changes the answer. The same property gets different leverage for a first-timer and a five-project investor.
- Subject-to value is not a denial. An appraiser’s note on as-is versus subject-to appraisals says it adds a completion checkpoint. It does not mean automatic rejection.
- Cheap markets behave differently. Slow-selling inventory may need a more conservative margin than the 70% screen implies.
- Bridge and refinance deals size differently. A purchase without rehab goes up to 80% of purchase price. Cash-out and rate/term refinances go up to 65% of value. Those are not flip numbers.
- Footprint. The program is not available in LA, MN, ND, or SD, or in Baltimore, Chicago, or Detroit.
Key Terms Defined
After-repair value (ARV): The estimated sale price of the property once renovations are complete.
Loan-to-cost: The loan as a share of purchase price plus rehab budget.
Loan-to-ARV: The loan as a share of the finished value. Here, capped at 75%.
Holdback: Rehab money the lender keeps in escrow until work is done and inspected.
Draw: A release of holdback funds after a phase of work passes inspection.
Subject-to value: An appraisal value that assumes the repairs get finished.
Questions to Ask Any Lender
Terms differ between lenders, so compare on these:
- Is the loan sized on project cost, ARV, or both, and which cap binds on my deal?
- Does my completed-project count change the tier?
- Is the rehab reimbursed, or can some be advanced at closing?
- What are the draw inspection and wire fees?
- Who orders the valuation, and what happens if it misses?
- What exit do you expect, and what is the term?
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.
Frequently Asked Questions
Does ARV or the as-is value set the loan on a flip?
Both matter. The loan is the lesser of a share of project cost and a cap of 75% of ARV. The as-is purchase price feeds the cost side. The finished value feeds the cap. Whichever is tighter decides the amount.
Can a first-time flipper qualify?
Yes, at the lower leverage tiers. With fewer than 2 completed projects, loan-to-cost is 85% of project cost, still capped at 75% of ARV. A 620 minimum score applies, with added conditions below 660. Everything varies by lender, property, and experience.
Is there a true 100% financing option?
No. Up to 100% of the rehab budget funds in draws against completed work, but the purchase is not funded at 100%. Investors often float the first draw and still need cash for closing costs and interest.
What if the appraised ARV is lower than my estimate?
The 75% cap drops with it, so the loan shrinks and your cash requirement grows. Options are a lower price, a smaller scope, more cash, or walking away. Run the deal at a conservative ARV before applying.
How do I exit if I cannot sell in time?
Terms run 6-18 months with no prepayment penalty, and there are no multi-year options. Many investors refinance into long-term DSCR financing once the property is stabilized, subject to lender guidelines. Plan that exit before you close.
For current hard money guidelines and terms on your project, see Lendmire’s hard money draw schedule rules page or ask the brokerage to walk through the current program sheet.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage built around DSCR investor lending, with programs available in 41 markets, including Washington, D.C. DSCR lenders commonly evaluate rental-income coverage instead of personal income paperwork — a practical fit for LLC-owned and multi-property investors. Terms vary by lender, property, leverage, and program. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Bankrate: the 70% rule for house flipping
2. Authority Appraisals: as-is vs as-repaired appraisals
3. Real Estate Skills: the fix and flip formula
4. New Jersey Real Estate Appraisal blog: as-is vs subject-to appraisal
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Hard Money Lender Requirements for the Seller of a Flip · Hard Money vs Bank Loan Requirements for a Rental Purchase · Private vs Direct Hard Money Lender Requirements for a Flip Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.