The Quick Read: Yes. On a fix-and-flip, after-repair value (ARV) sets the ceiling on the total loan, no matter how much the cost-based leverage tier would otherwise allow. The lender runs two tests, one on project cost and one on ARV, and funds the lower result.
- Every fix-and-flip tier in Lendmire’s network is capped at 75% of ARV, whatever the experience level.
- Cost-based leverage is stated as a share of project cost: up to 93% at five or more completed projects, up to 90% at two or more, and 85% below that.
- Up to 100% of the rehab budget can fund in draws, released against completed work.
- Thin spreads between all-in cost and ARV are where the cap binds and the borrower brings cash.
- Terms vary by lender, property, and experience, and nothing here is a commitment to lend.
What Is ARV and Who Decides It?
ARV is the market value of the property after repairs are done, per Wall Street Prep’s ARV definition. The key point for a borrower: the lender decides the number, not you.
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 usually set ARV with a broker price opinion (BPO) or an independent appraisal, according to Nav’s investor-education explainer. The valuation leans on comparable sales of similarly renovated homes nearby. Your own estimate is a starting point. It does not control the file.
The lender also reads your scope of work and budget. A budget that looks too thin for the scope, or a property too far gone, can stall a file before the ARV test ever runs.
The Two Tests on Every Flip Loan
Hard money on a flip is asset-based, which means the loan is sized to the property and the plan. Two tests run side by side, and the lower result wins.
| Factor | Cost test | ARV test |
|---|---|---|
| Measures | Share of project cost | Share of after-repair value |
| Moves with | Experience tier | Appraiser’s ARV |
| Network figure | Up to 93%, 90%, or 85% of cost | 75% of ARV, every tier |
| Binds when | Purchase is cheap vs. ARV | Spread is thin |
The cost test is where experience shows up. Across Lendmire’s wholesale network, the top tier is reserved for investors with documented completed projects. First-time investors can qualify at the lower tiers, but they get less cost leverage.
The ARV test does not move with experience. It is a fixed ceiling on the total commitment. That is why a veteran flipper and a newer investor can both hit the same wall on a thin deal.
The ARV cap exists because the lender’s cushion depends on the exit. If the property sells for less than projected, the lender wants the loan covered by what the repaired house can realistically bring.
Worked Example: When the Cost Test Binds
These figures are modeled assumptions, not market data. Picture a deal where an experienced investor buys deep: the purchase price plus rehab comes to well under half of ARV.
At the 90% or 93% cost tier, the cost-based loan comes out far below 75% of ARV. The ARV test never comes into play. The borrower’s cash need is the gap between all-in cost and the cost-based loan, plus carry and closing costs.
Cheap purchases make the cap invisible.
Worked Example: When the ARV Test Binds
Now change one thing. Take the same experienced investor, same tier, same rehab scope, but a purchase price that eats most of the spread. All-in cost now sits close to ARV.
Run the numbers this way, as a modeled assumption: purchase plus rehab equals 85% of ARV. The cost test at the 93% tier would fund 93% of project cost, which works out to roughly 79% of ARV. The ARV test caps the total loan at 75% of ARV. The ARV test wins, and the borrower funds the difference out of pocket.
Same borrower. Same tier. Smaller loan. The deal changed, not the investor.
Nav makes the same point about so-called 100% financing: even when a lender funds all of the purchase and rehab, the total must still fit under its ARV cap, which the article says is commonly 70% to 75%. It adds that thin margins between all-in cost and ARV often will not qualify for full financing. Those are market-wide figures from Nav. The network figure for Lendmire’s placements is 75% of ARV.
How Sensitive Is the Loan to the Appraiser’s Number?
Very sensitive, once the ARV test binds. Every dollar the appraiser shaves from ARV cuts the maximum loan by 75 cents. Above the crossover point, where the cost test already sits below the cap, ARV changes nothing.
Say an investor underwrites a deal on an ARV that the BPO later trims. If the cost test was the binding one, the loan stays put. If the ARV test was binding, the loan drops and the borrower’s cash to close rises by the difference.
A rough rule: the thinner the spread, the more a weak appraisal hurts. A wide spread absorbs appraisal variance. A thin spread turns it into a cash call.
Two habits protect the file:
1. Run conservative comps before the offer, using renovated sales close to the subject, not the best sale on the street.
2. Get the scope of work and budget in front of the valuation early, so the ARV reflects the finish level you actually plan to deliver.
Working Backward: The Maximum Purchase Price That Fits
Investors who want full leverage on the cost side should reverse-engineer the price instead of discovering the cap at the term sheet.
The logic is simple:
1. Take your conservative ARV.
2. Multiply by 75% to find the ceiling on the total loan.
3. Subtract the rehab budget you expect to finance.
4. What remains is the most the loan can put toward the purchase.
That is the largest purchase the loan can carry at full leverage. Pay more than that, and the difference comes from your cash. If your goal is minimal cash in, the offer price should land at or below that number. If it doesn’t, either the price or the scope has to move.
This is also different from the familiar 70% rule, which is a deal-analysis guideline for how much to pay. The lender’s ARV cap is a separate ceiling on the loan itself. Investors often blur the two.
What “100% Financing” Really Means Under a Cap
There is no true 100% purchase program in Lendmire’s network. The phrase usually refers to the rehab budget, where up to 100% can fund in draws. It does not mean the whole deal is financed with nothing down.
Even where a lender funds all of a purchase and all of the rehab, the total still has to fit under the ARV cap. That is why it works only on deals bought well below value. Many lenders also want the borrower to have some skin in the game, even when the math appears to cover everything.
Cash needed at closing is more than the down payment. It includes the gap between all-in cost and the lesser-of result, plus closing costs, carry, and the float you carry between draws.
Draws and the Cap
Rehab money does not arrive at closing. It releases in draws against inspected, completed work, and the cap is tested on the total commitment.
That creates a practical float. The borrower may front early repair costs and get reimbursed after the inspection. A lender can commit to a large total yet fund only part at closing. Investors who budget only for the down payment run short mid-project.
A mid-project scope change matters too. If the scope grows, the rehab budget grows, and the total commitment can push against the cap. Changes go through the lender, not around it.
When the Cap Binds: Your Options
If the ARV test is the one limiting the loan, there are five levers:
| Option | What it does | Trade-off |
|---|---|---|
| Negotiate price | Widens spread | Seller must agree |
| Trim scope | Lowers rehab cost | May lower ARV too |
| Bring more cash | Fills the gap | Ties up capital |
| Add a partner | Shares the cash need | Splits profit |
| Walk away | Protects capital | Loses the deal |
Price is usually the best lever, because it fixes the problem without touching ARV. Trimming scope is risky when the finish level is what supports the comps. Junior debt or gap funding can fill a shortfall, but it needs lender consent and adds cost.
An investor who cannot make the spread work should treat that as information about the deal, not the lender.
Edge Cases Worth Knowing
Lenders vary, so treat any single lender’s approach as an illustration of that variation, not a rule.
Different loan types size differently. A bridge purchase without rehab runs up to 80% of purchase price in Lendmire’s network. Cash-out and rate-and-term refinance files top out at 65% of value. Those files lean on as-is value, not a future repaired value.
Agency and DSCR rental loans work differently from all of this. They size to the appraised value of the property as it stands, using forms such as the 1025 small residential income appraisal described in the Fannie Mae Selling Guide. They do not lend against a future repaired value.
Where This Connects to the Exit
Many investors refinance out of hard money into long-term DSCR investor loans once the property is rented and stable. Lendmire brokers that path. The ARV logic shapes that exit, since the refinance sizes to the new appraised value and the rental income, not to what you spent.
On a rental refinance, DSCR compares rent to the full monthly obligation, and a ratio at or above 1.00 is where select programs start. Clearing that ratio does not mean positive cash flow, because repairs, vacancy, management, and capex sit outside the calculation. The complete DSCR loans guide covers how the ratio works. For timing the handoff, see Lendmire’s piece How to Time a Two-Step DSCR Cash-Out After a Hard Money Flip.
Key Terms Defined
- ARV: the estimated market value of the property after repairs are complete.
- Loan-to-cost: the loan as a share of purchase price plus rehab, or of total project cost.
- BPO: a broker price opinion, a lighter valuation a lender may use instead of a full appraisal.
- Draw: a release of rehab funds after the lender confirms completed work.
- Skin in the game: the borrower’s own cash invested in the deal.
Mistakes and Misconceptions
“The 70% rule is the lender’s cap.” It is a pricing guideline for the investor. The lender’s ceiling is separate.
“100% financing means no cash in.” The cap still applies, and fees and carry sit outside the loan.
“A higher tier always means a bigger loan.” Experience lifts the cost test. It does not lift the 75% of ARV ceiling.
“The loan funds at closing.” Rehab money comes in draws.
“ARV is whatever I project.” The lender’s BPO or appraisal controls it.
Frequently Asked Questions
Is ARV a hard cap on a flip loan?
Yes, in practice. Across Lendmire’s network every fix-and-flip tier is capped at 75% of ARV, and the lender funds the lower of the cost-based and ARV-based results. Terms vary by lender, property, and experience.
Does a low appraisal reduce my loan?
Yes, it can. If the ARV test is binding, the maximum loan falls by 75 cents for each dollar cut from ARV, and your cash to close rises. If the cost test is binding, a modest ARV drop may change nothing.
Can I get 100% financing on a flip?
Not on the whole deal. Up to 100% of the rehab budget can fund in draws, but the purchase is financed at a share of cost, and the total must fit under the ARV cap. Nav notes that thin margins often will not qualify for full financing.
Does experience change the ARV cap?
No. Experience changes the cost-based tier, up to 93% of project cost at five or more completed projects. The 75% of ARV ceiling holds across tiers.
Can a gap loan or partner cover the shortfall?
Often, yes, but it needs lender consent and adds cost or splits the profit. Price negotiation is usually cleaner.
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. Lendmire is a broker arranging financing through select lenders in its wholesale network across 41 markets, including Washington, D.C.
About Lendmire
As a DSCR and non-QM mortgage broker, Lendmire — NMLS# 2371349 — connects investors with wholesale lending channels across 41 markets, including Washington, D.C. The property’s rental income, not the borrower’s tax returns, is central to lender review, which works for self-employed operators and portfolios beyond four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Wall Street Prep: After Repair Value (ARV)
2. Nav: Hard Money Loans and 100% Financing
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How a Lender Reads a Seller-Carried Note on a Hard Money Loan · Hard Money Rehab Draw Inspections for a Full-Gut Rehab · Hard Money Loan ARV Requirements in a Small Town With No Comps
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.