The Quick Read: Hard money flip loans are sized by two tests at once, and the lower result sets your loan. One is a percentage of project cost (purchase plus rehab) that moves from 85% to 93% as you complete more projects. The other is a cap of 75% of after-repair value. Up to 100% of the rehab budget funds in draws, not at closing, and the network has no true 100% purchase program.
- Cost test: the loan is typically 85% of project cost with fewer than two completed projects, 90% with two or more, and 93% with five or more.
- Value cap: every tier is capped at 75% of after-repair value (ARV), and the cap covers the whole loan, rehab holdback included.
- Your cash: the tighter test sets your cash to close, so it is rarely just 100% minus the headline percentage.
- Rehab money: it is held back and released in draws as work is completed, so you usually front the early costs.
- Everything varies by lender, property, and experience, and none of it is a commitment to lend.
Key Terms Defined
Loan-to-value (LTV) is the loan amount divided by the value of the property backing it, per Corporate Finance Institute. On a flip, “value” is usually a projected number, not today’s price.
After-repair value (ARV) is what the property should be worth once the renovation is finished. Comparable sales and the lender’s valuation support it.
Loan-to-cost (LTC) is the loan divided by project cost. Project cost is the purchase price plus the rehab budget.
Holdback is the part of the loan reserved for renovation. It is released in draws, not paid out at closing.
Draw is a payment to the borrower after a portion of the work is finished and reviewed.
Completed projects are the documented flips that place you in a leverage tier. Experience raises your tier.
Debt service coverage ratio (DSCR) compares a rental’s income to its monthly obligation. It matters later, when you refinance out of the flip.
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.
How Does a Lender Actually Size the Loan?
Underwriting a flip is mostly underwriting the project: the property, the plan, and the exit. The lender takes your purchase contract, a line-item rehab budget, and support for your ARV. Then it works through a short sequence.
1. Value the deal twice. The lender wants an as-is value and an ARV. The borrower typically pays for the valuation.
2. Run the cost test. The lender applies your tier percentage to purchase plus rehab. That tier is 85%, 90%, or 93% of project cost, depending on completed projects.
3. Run the value test. The lender caps the entire loan at 75% of ARV.
4. Take the lower number. That is the maximum loan.
5. Split it. The purchase advance funds at closing. The rehab portion sits in a holdback.
6. Release draws. You start the work, a portion is completed, and the lender reimburses you after review.
Most programs in the network follow this pattern. The details differ by lender, and some add an as-is value check on the purchase piece.
Why Do Lenders Cap Against ARV and Not Today’s Value?
A flip lender is betting on the finished product. The ARV cap leaves an equity cushion, so if the sale disappoints, the lender can still recover its money from the property.
That cushion is also why income documents matter less. The loan is underwritten to the asset, so the cushion does the work that a pay stub would do elsewhere. Credit still counts. A 620 score is the typical floor, with added conditions below 660.
The cost test does a different job. It makes you put real money into the deal, because the lender will not fund 100% of what you spend on a purchase.
What Is the Difference Between the Purchase Portion and the Rehab Portion?
The purchase portion is measured against what you pay. The rehab portion is measured against what you plan to spend. Both feed into project cost, and both sit under the ARV cap.
Here is the part that trips people up. Lenders advertise up to 100% of the rehab budget, but that is a draw feature, not a closing feature. The money goes into a holdback and comes out as work is finished.
So the working picture looks like this:
- At closing, you pay your share of the purchase plus fees. The lender pays the rest of the purchase advance to the seller.
- During the work, you pay contractors first. The lender reimburses you after a draw request and a review.
- Some lenders pay per line item and others pay by overall percent complete. Either way, you stick to the submitted scope.
That reimbursement pattern is why cash flow during the rehab matters as much as the leverage percentage.
How Experience Moves the Limits
Experience changes your cost tier. It does not change the ARV cap. Here is the network’s typical structure for a fix-and-flip purchase with rehab. Figures vary by lender, property, and experience.
| Completed projects | Loan as % of project cost | ARV cap |
|---|---|---|
| Fewer than 2 | Typically 85% | 75% of ARV |
| 2 or more | Typically 90% | 75% of ARV |
| 5 or more | Typically 93% | 75% of ARV |
First-time flippers can qualify, but at the lowest tier. The top tier is reserved for investors who can document their completed projects.
Ground-up construction runs tighter. Typical leverage is up to 90% of cost and 75% of completed value, and that tier needs three or more completed projects. Construction is also allowed up to 10 units, while standard flips cover 1-4 unit residential property.
What Does Each Deal Shape Look Like? Three Worked Examples
These examples are illustrative, not quotes. They set ARV at 100 units so the logic stays clear, and they assume the 90% tier with the 75% ARV cap. The loan is the lower of the two tests.
| Scenario | Project cost (units) | Cost test, 90% (units) | ARV cap (units) | Loan (units) | Your cash before fees (units) |
|---|---|---|---|---|---|
| A: modest rehab | 75 | 67.5 | 75 | 67.5 (cost test binds) | 7.5 |
| B: heavy rehab | 85 | 76.5 | 75 | 75 (cap binds) | 10 |
| C: B with a low valuation | 85 | 76.5 | 67.5 | 67.5 (cap binds) | 17.5 |
Scenario A buys at 60 units with a rehab budget of 15 units. The cap never matters. You bring 10% of the project cost, and that is the headline number working as advertised.
Scenario B buys at 60 units with a rehab budget of 25 units. The cost test alone would allow a loan above the cap, so the cap trims it to 75 units. You bring 10 units, which is more than the 8.5 units the headline percentage implied.
Scenario C uses the same deal, but the valuation comes in 10% below your projection, so ARV is 90 units. The cap drops to 67.5 units. Your cash climbs from 10 units to 17.5 units, without a dollar of the budget changing.
An ARV that is 10% off can cost more than the leverage tier you were arguing about. The comparable sales behind your ARV are the most important input in the file.
Where Does the Cap Start to Bind?
The cap binds when project cost climbs high enough that your tier percentage would push the loan past 75% of ARV. Divide 75% by your tier percentage, and you have the break-even point for project cost, measured against ARV.
- At the 85% tier, the cap binds once project cost passes a bit under nine-tenths of ARV.
- At the 90% tier, it binds once project cost passes about five-sixths of ARV.
- At the 93% tier, it binds once project cost passes roughly four-fifths of ARV.
Below those points, the cost test governs. Above them, the cap governs, and extra spending comes straight out of your pocket.
This is also why a cheap purchase with light rehab leaves the cap untouched, while an expensive purchase or a heavy rehab shrinks the loan below the headline percentage.
Working Backward: Your Maximum Purchase Price
Experienced flippers start from the exit and work backward. Here is a simple sequence.
1. Set a conservative ARV. Use comps you would defend to an underwriter, not your best-case number.
2. Apply a buyer’s screen. The common 70% rule caps the price you pay at ARV times 0.70, minus repair costs, as Bob Vila lays out. It is an investor screen, not a lender limit, and the right percentage shifts with your market and exit.
3. Test the loan. Run the cost tier and the 75% cap against the price from step 2.
4. Count your cash. Project cost minus the loan, plus fees and early rehab spending, is what you actually bring.
5. Check the margin. The 30% the rule leaves behind has to cover profit and fixed costs. Mashvisor splits that 30% into 15% for profit and 15% for fixed costs.
Say your ARV is 100 units and your rehab is 15 units. The screen gives a maximum purchase of 55 units. Project cost is then 70% of ARV, and a 90% tier loan covers 63% of ARV. You bring about 7% of ARV before fees.
Holding costs, closing costs on both ends, and your profit must all fit inside that remaining margin. If they do not, the deal needs a lower offer, not a better loan.
What Counts Toward Cash to Close?
Your down payment is only the first piece. Cash to close also includes lender and third-party fees, any early rehab spending you front before the first draw, and the valuation cost. Hold a contingency on top, because scope changes are normal on a rehab.
Interest accrues during the hold. Terms typically run 6 to 18 months, interest-only, with no prepayment penalty. Budget the carry as part of the deal.
Flip, Bridge, or Refinance: Which Limit Applies?
Do not blend these into one range. Each product measures leverage differently. These are typical network figures, and they vary by lender, property, and experience.
| Product | Typical limit | Measured against |
|---|---|---|
| Fix-and-flip purchase with rehab | 85%-93% | Project cost, capped at 75% of ARV |
| Bridge purchase without rehab | Up to 80% | Purchase price |
| Cash-out or rate-and-term refinance | Up to 65% | Value |
| Ground-up construction (3+ projects) | Up to 90% | Cost, capped at 75% of completed value |
Loan size runs up to $5,000,000, with larger loans by exception. The rehab budget funds up to 100% in draws, and that is a rehab figure, not a purchase LTV.
Where Does the General Rule Break?
Several situations bend the pattern.
- Cheap purchase, light rehab. The cap rarely binds, so the cost tier fully drives your leverage.
- Heavy rehab. The cap takes over, and your cash grows with every added dollar of scope.
- A new investor. The 85% tier applies, and you can still qualify, but you bring more cash.
- Full financing claims. A deal can only be fully funded when project cost lands under the ARV cap, or when a separate gap funder or extra collateral covers the difference. That is a custom arrangement, not a standard tier. The network has no true 100% purchase program.
- Property type. Eligibility is limited to non-owner-occupied residential.
- Lender style. Some lenders size purely off ARV and others purely off cost. Ask which test governs, and whether the rehab is held back.
Common Sizing Mistakes
- Using the wrong denominator. A percentage of cost is not a percentage of value.
- Inflating ARV. An optimistic ARV only looks good until the valuation lands.
- Ignoring fees. Closing costs and early rehab spending are cash outside the loan.
- Reading 100% rehab as cash at closing. It is released in draws.
- Skipping contingency. A rehab that runs over lands in your pocket, not the lender’s.
- Treating the 70% rule as a loan rule. It is a purchase screen. It does not guarantee your exit.
What Does the Investor Decision Look Like?
Start with the exit. If you plan to sell, your job is to keep the margin intact after the financing. If you plan to hold, the flip loan is a bridge, and the refinance is the real test.
Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire arranges that path. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Clearing that test does not mean positive cash flow, since repairs, vacancy, and management sit outside it. Lendmire’s complete DSCR loans guide walks through how that exit is sized.
A rehab that fits a flip lender’s cap can still trap cash at the refinance, because the refinance is sized on appraised value, not cost. Typical refinance leverage on this product is up to 65% of value. Plan both numbers before you buy.
Frequently Asked Questions
Can a first-time flipper qualify for a hard money flip loan?
Yes, at the lowest leverage tier. Fewer than two completed projects typically means 85% of project cost, still capped at 75% of ARV. The usual credit floor is 620, with added conditions below 660. Underwriting stays asset-based, so the property, plan, and exit all matter.
Does 100% rehab financing mean I need no cash?
No. The rehab funds are held back and released in draws after completed work. You typically front the early costs, and you still bring your share of the purchase plus fees. There is no true 100% purchase program in the network.
Is the loan based on purchase price or value?
Both, in different ways. The cost test uses purchase price plus rehab budget. The cap uses ARV. The lower result sets the loan, so a weak ARV can override a strong tier.
What happens if the valuation comes in low?
The 75% cap shrinks, and your cash to close rises by the amount the loan shrinks. In the third worked example, a 10% ARV miss moved cash from 10 units to 17.5 units on a 100-unit ARV. You can renegotiate the price, trim the scope, or bring more cash.
Do rehab funds count toward the limit?
Yes. The 75% ARV cap covers the entire loan, including the holdback. Rehab money funded in draws is leverage, even though it reaches you after closing.
Ready to Run Your Own Numbers?
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. As a mortgage broker, Lendmire arranges these loans through select lenders in its wholesale network across 41 markets, including Washington, D.C. An illustrative calculator can help you test cost-versus-cap scenarios before you submit a deal.
About Lendmire
A non-QM mortgage broker (NMLS# 2371349), Lendmire arranges DSCR financing for real estate investors in 41 markets — 40 states plus Washington, D.C. Because deals are underwritten primarily on property cash flow rather than personal income documentation, the structure suits self-employed buyers and entity-owned portfolios. Lendmire places loans through wholesale investor lenders; it is not a direct lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Short-term financing tends to work best when the long-term plan is decided early – see the hard money loan overview.
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References
1. Corporate Finance Institute – Hard Money Loan
2. Bob Vila – The 70% Rule in House Flipping
3. Mashvisor – The 70% Rule in Real Estate
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 Loan Borrowing Limits for a Condo Purchase · Can a Business Owner Qualify for a Hard Money Fix and Flip Loan? · Small Balance Hard Money Loan Requirements for Fix and Flip Investors
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.