The Quick Read: A hard money lender tests every flip against two ceilings, loan-to-cost and loan-to-after-repair-value, and lends the lower of the two amounts. When an LLC is the borrower, the entity takes title and signs the note, while the guarantor’s credit, liquidity and track record set the leverage tier.
- Loan-to-cost sizing, tiered by completed projects, is the starting point; the after-repair-value cap often binds on tight deals.
- Purchase money funds at closing, and the rehab budget is held back and released in draws.
- The LLC does not remove personal liability once the owner signs a guarantee.
- Points, closing costs, reserves and any gap between the two tests come out of the investor’s cash.
Most flippers guess their loan amount from one number and get surprised by another. Learn both tests and you can predict your cash to close before you apply.
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.
Key Terms Defined
- Project cost: the purchase price plus the rehab budget.
- After-repair value (ARV): the projected value of the property once the renovation is complete.
- Loan-to-cost (LTC): the loan divided by project cost.
- Loan-to-ARV (LTARV): the loan divided by the projected post-renovation value.
- Initial advance: the portion of the loan that funds the purchase at closing.
- Holdback: the rehab portion the lender controls and releases in draws after verified work.
- Guarantor: the individual who personally backs the LLC’s loan.
What Are the Two Tests a Lender Runs?
A lender runs a cost test and a value test, then lends the lower result. This is asset-based underwriting: Business.com’s hard money explainer notes that collateral value is the overriding factor, though lenders also look at credit and other items.
| Test | What it measures | What it protects against |
|---|---|---|
| Loan-to-cost | Loan divided by purchase plus rehab | Lending more than the project costs |
| Loan-to-ARV | Loan divided by projected finished value | Lending more than the exit can repay |
Across the wholesale network Lendmire works with, fix-and-flip leverage is tiered by documented completed projects. It runs 93% of project cost at 5+ completed projects, 90% of project cost at 2+, and 85% with fewer than 2. Every tier is capped at 75% of after-repair value. Those figures vary by lender, property, and experience, and nothing here is a commitment to lend.
Bridge purchases without rehab can reach up to 80% of purchase price. Refinances run up to 65% of value. Up to 100% of the rehab budget funds in draws against completed work. That last figure is a rehab-budget number, not a purchase LTV. There is no true 100% purchase program.
Is the 70% Rule the Lender’s Cap?
No. The 70% rule is an investor’s rule of thumb for what to pay: no more than 70% of ARV minus repairs. The 30% gap is meant to absorb holding costs, closing costs on both sides, and profit. It is not a lending ceiling.
Keep two ideas apart. One is your purchase math, which decides whether the deal makes money. The other is the lender’s sizing, which decides how much of it the lender will fund. A deal can pass the first and still get a smaller loan from the second.
How Does One Deal Get Sized, Step by Step?
The sizing follows a fixed order. Here is how it runs from package to loan amount.
1. Deal package. You submit the purchase contract, scope of work, budget, contractor bids and ARV support. If you borrow through an LLC, entity documents join the file.
2. ARV determination. ARV rests on sales of comparable renovated homes, adjusted for differences. The lender controls this number, not you. Appraisers typically receive the rehab budget and build the value from it, and lenders tend to discount borrower and contractor estimates.
3. Two-test sizing. The lender computes the cost-based amount and the ARV-capped amount. The lower one governs.
4. Split. The loan divides into an initial advance for the purchase and a rehab holdback.
5. Entity and guarantor review. The lender verifies the LLC and underwrites the person behind it.
6. Exit check. The lender wants a written sale or refinance plan.
To see both outcomes, use modeled assumptions. Say a flip is bought at a price that, with rehab, puts project cost at 90% of ARV. A cost-based tier alone would size the loan above the 75% ARV cap, so the cap governs and the loan lands at 75% of ARV. You cover the gap. Now say a cheaper deal puts project cost at 70% of ARV. Even at 93% of cost, the loan is about 65% of ARV. Cost binds, and the ARV cap never comes into play.
That is why a small drop in ARV can flip the binding test. Run both before you bid, not after.
How Does an LLC Change the File?
The LLC is the borrower and takes title, but the guarantor’s profile drives eligibility and leverage. Lenders verify the entity’s existence and authority, then underwrite the human behind it. Lendmire’s piece Can an LLC Take Title on a Hard Money Fix-and-Flip Loan? covers that title question in detail.
| Item | Who or what is evaluated |
|---|---|
| Entity existence | Articles of Organization, good-standing certificate |
| Authority to sign | Operating agreement, ownership percentages |
| Tax identity | EIN letter |
| Credit and liquidity | The individual guarantor |
| Track record | Typically the guarantor’s completed projects |
Foreign qualification is added when the LLC is formed in a different state than the property. A newly formed, single-purpose LLC has no history, which is exactly why underwriting leans on the guarantor. The entity must exist and be in good standing before closing, so form it and gather documents before contract deadlines. A missing EIN letter or stale good-standing certificate is a common stall.
Experience matters for leverage, not just eligibility. If your new LLC is the borrower but you have completed projects personally, lenders typically look at your record, and documentation of those projects supports the higher tiers. First-time investors qualify at the lower leverage tiers. The top tier is reserved for experienced investors. Credit starts at a 620 minimum, with additional conditions below 660, and underwriting stays asset-based around the property, the plan and the exit.
Does an LLC Remove Personal Liability?
Not once you sign a guarantee. The NCUA Examiner’s Guide on personal guarantees says principals are not personally liable when the borrower is an LLC unless they sign a separate guarantee. It also describes guaranteeing as standard in small-business and investor real estate lending. That guidance covers credit unions, so it is an analogy rather than a rule for private lenders. Nolo’s LLC liability guide makes the same point: a signed personal guarantee leaves you personally liable if the LLC’s assets fall short.
Ownership cutoffs for who must guarantee vary by lender. Plan on any controlling owner being asked to sign.
How Do the Holdback and Draws Work?
The purchase portion funds at closing. The rehab portion sits in a lender-controlled holdback. You front early work and get reimbursed after verified progress, usually shown by photos or an inspector.
This catches people off guard. Rehab money is not wired at closing. Up to 100% of the rehab budget can fund in draws against completed work, but you need liquidity for each phase plus a buffer. Draw counts and per-draw fees vary by lender, and fewer draws generally mean fewer fees. If the budget changes mid-project, expect the lender to review the change. Confirm the inspection process in writing before you close, because turnaround on inspections affects your carry.
What Sits Outside the Loan Amount?
Points, closing costs, reserves and any gap between the two tests come from your cash. Cash to close equals whichever ceiling binds, plus those costs. The term runs 6-18 months, interest-only, with no prepayment penalty, so carry costs accrue until you sell or refinance.
Loan sizes go up to $5,000,000, with larger loans by exception, and smaller balances vary by lender. Collateral is non-owner-occupied residential property of 1-4 units. Ground-up construction runs to 10 units, at up to 90% of cost and 75% of completed value at 3+ completed projects.
How Do Exit Plans and Margin Checks Affect Sizing?
Lenders want to see the loan can be repaid, and a thin margin makes them cautious. A sale exit rests on the ARV and comps. A refinance exit rests on rent, appraisal and value together. A conservative ARV on the flip loan protects any later refinance.
Many investors who keep the property refinance out of hard money into long-term DSCR financing once it stabilizes, and Lendmire brokers that path. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Lendmire’s complete DSCR loans guide explains how that exit works.
Why Is the Lender’s Number Lower Than Yours?
Run this checklist when the quote disappoints:
- ARV haircut. The lender’s value came in under your estimate.
- Comp selection. Different comparable sales were used.
- Scope disagreement. The lender trimmed or questioned the budget.
- Lower-of-two rule. The ARV cap, not cost, is the binding test.
- Experience tier. Fewer completed projects mean a lower cost tier.
Where the General Rule Breaks
- Tight margins. On rehab-heavy deals the ARV cap overrides cost-based leverage.
- Bridge or no-rehab deals. These size on as-is value, not ARV.
- Low-ARV properties. Fixed costs eat a larger share, so the 70% rule works poorly.
- Missing entity paperwork. A lapsed good-standing certificate can stall an otherwise sound file.
Pre-Application Self-Check
1. Calculate project cost and apply your experience tier.
2. Calculate 75% of a conservative ARV.
3. Take the lower number as your estimated loan.
4. Subtract it from project cost to see your gap, then add points, closing costs and reserves.
5. Confirm the LLC is formed and its documents are current.
This article is general information, not legal or tax advice; consult a qualified attorney or CPA about your own situation.
Frequently Asked Questions
Does the lender size on purchase price or ARV?
It uses both. The lender computes a cost-based amount and an ARV-capped amount, then uses the lower one. On tight deals the ARV cap usually governs.
Who determines ARV?
The lender does, typically through an appraisal that factors in your rehab budget. Your own estimate and the contractor’s get discounted, so build a conservative number into your plan.
Does a first-time flipper get sized differently?
Yes. Leverage is tiered by completed projects, and first-time investors qualify at the lower tiers. Eligibility is not shut off, but your cash requirement will be higher.
Is the rehab money paid up front?
No. You fund early work and the lender reimburses it in draws after verified progress. Up to 100% of the rehab budget can fund this way, subject to lender guidelines.
Can an LLC borrow for a flip?
Generally yes, subject to program terms. The LLC takes title, and the guarantor’s credit, liquidity and experience drive the leverage tier.
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.
For current guidelines and terms, see Lendmire’s hard money 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. Business.com – Hard Money Loans and Private Lenders
2. NCUA Examiner’s Guide – Personal Guarantees
3. Nolo – Limited Liability Protection for LLCs
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 Hard Money Lender Limits Fix and Flip Property Types · How a Hard Money Lender Sizes an Interest-Only Fix and Flip Loan · How a Hard Money Lender Sizes the Maximum Term for a Flip
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.