The Quick Read: A hard money lender runs two tests on a condo flip and lends the smaller result. One test is based on what the deal costs. The other is based on what the finished unit will be worth. The building itself then adds a third layer of review, which is why a condo can come in smaller than a house at the same price.
- Test one is cost: a percentage of purchase price plus the rehab budget, tiered by your completed projects.
- Test two is value: every tier is capped at 75% of after-repair value (ARV), meaning the unit’s expected worth once the work is done.
- Rehab money is drawn: up to 100% of the rehab budget funds in draws against completed work, not at closing.
- The HOA matters: association health, dues, and rules can shrink leverage and the resale pool.
- Everything varies: terms depend on the lender, the property, and your experience, and nothing here is a commitment to lend.
Picture two investors buying the same unit. One has finished five projects. The other has finished none. Same condo, same rehab, very different loans. Here is how that happens.
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
Loan-to-cost (LTC): the loan divided by total project cost, meaning purchase price plus rehab.
After-repair value (ARV): what the finished unit should sell for, based on comparable sales.
Draw: a scheduled release of rehab funds after an inspector confirms the work was done.
Holdback: the rehab money the lender keeps back at closing and releases through draws.
Warrantable condo: a building that meets the standards conventional buyers’ lenders use. A non-warrantable building can limit your buyer’s financing.
Binding constraint: whichever test produces the smaller loan. That is the one that controls.
What Are the Two Tests?
Lenders size on cost first and value second, then take the lesser result.
On the Lendmire side, the verified structure for a fix-and-flip works like this. Leverage is tiered by documented completed projects:
| Experience | Loan-to-cost | Value cap |
|---|---|---|
| 5+ completed projects | Up to 93% of project cost | 75% of ARV |
| 2+ completed projects | Up to 90% of project cost | 75% of ARV |
| Fewer than 2 | Up to 85% of project cost | 75% of ARV |
These are typical ranges that vary by lender, property, and experience. The top tier is reserved for experienced investors. First-time investors qualify at the lower tiers, with a 620 minimum credit score and additional conditions below 660.
Notice what is missing: your income. Underwriting here is asset-based. The lender looks at the property, the plan, and the exit.
How Does the Sizing Run, Step by Step?
Here is the sequence a lender follows, start to finish.
1. You submit the deal. That means the contract price, the scope of work with a budget, and your ARV estimate.
2. The lender establishes ARV. An appraiser values the finished unit from comparable sales. For condos, the usual form is the individual condominium unit report, Form 1073. Flip loans are not agency loans, so that form is simply the standard name for a condo appraisal.
3. Test one (cost). The lender applies your tier’s percentage to project cost.
4. Test two (value). The lender applies the ARV cap to the total loan, then takes the lesser of the two results.
5. You fund the gap. The difference between the loan and the full deal, plus closing costs and reserves, comes from your cash.
6. The rehab portion is held back. It is released in draws as inspected work is completed.
7. You deliver documents. Expect the purchase contract, scope of work, valuation, and the HOA documents.
The appraisal form also matters for a quieter reason. Its sales grid reports prior sale and transfer history for the subject and the comps. That history is how a quick resale gets noticed, so lenders see exactly what you paid and when.
Why Doesn’t “100% Financing” Mean Zero Down?
Because the total still has to fit under the lender’s ceiling. Nav explains that most hard money lenders don’t release the whole rehab budget at closing. They release it in stages as an inspector verifies completed work. It also notes that a “100% financing” offer must still fit under the lender’s maximum, usually tied to ARV.
Apply that to Lendmire’s structure. Up to 100% of the rehab budget funds in draws. That is a rehab-budget figure, never a purchase loan-to-value. There is no true 100% purchase program. The purchase side is financed at your tier’s percentage of project cost, and the borrower brings the rest.
Worked Example: A Standard Condo Deal
Run the numbers on a modeled deal. These are assumptions for illustration, not market data. Say a condo costs $200,000 to buy, the rehab budget is $50,000, and the expected ARV is $330,000. Total project cost is $250,000.
- Cost test at the 90% tier: 90% of $250,000 is $225,000.
- Value test: 75% of $330,000 is $247,500.
- Result: the cost test is smaller, so cost binds.
The ARV cap is not squeezing this deal. The investor’s equity, not the appraisal, sets the check they write.
Now shrink the margin. Keep the same cost but lower the ARV to $290,000. The value test becomes 75% of $290,000, which is $217,500. That is below the $225,000 cost result, so value now binds. The loan drops, and the investor brings more cash. Same condo, same rehab, thinner profit, bigger check.
That is the pattern to remember. A thin-margin condo needs more equity even when the headline leverage looks high.
How Does the Condo Change the Number?
The building is a test the unit has to pass. Real Estate Skills says condos make hard money lenders nervous because so much is controlled by the HOA and the rest of the building. It adds that lenders will almost certainly cap leverage on condo projects.
Across the wholesale network, that matches what brokers see. Lenders review the building more closely than a single-family house, and some trim leverage or tighten terms when the project looks weak. How much depends on the lender, the property, and your experience.
The building affects three things.
Leverage. A project with problems can draw a lower loan at the same price. Lenders protect themselves against a building they would struggle to sell into.
ARV. Comps for a condo often sit in the same building, and there may be few of them. Appraisers must discuss the project in the report, so building problems can pull value down. That is an inference from the structure of the form, not a lender rule.
Your exit. This is the part many flippers miss. Your buyer usually needs financing. Litigation, high investor concentration, and low reserves shrink the buyer pool. A non-warrantable building, Real Estate Skills notes, can undo your financing regardless of how good the rehab is.
Agency warrantability rules apply to your buyer’s end loan, not to your flip loan. Even so, a lender sizing your loan is thinking about who can buy the unit from you. If the building scares off financed buyers, the unit sits, and the lender’s exit weakens.
Same Unit, Three Buildings
Here is one modeled unit in three situations. The figures are illustrative assumptions, using the 90% tier and the same $250,000 project cost from above. The cost test result is $225,000 in every row.
| Scenario | ARV | Binding test | What changes |
|---|---|---|---|
| Clean building | $330,000 | Cost | Full tier loan; normal cash needed |
| Problem building | $300,000 | Cost, plus possible leverage trim | Value test ties the cost result; lender may still trim |
| Low appraisal | $280,000 | Value (75% of $280,000) | Smaller loan, more cash |
In the problem-building row, 75% of $300,000 is $225,000, the same as the cost result. The ARV cap does not shrink the loan by itself. Any smaller loan there comes from the lender trimming leverage because of the building’s condition. In the low-appraisal row, the ARV cap alone does the damage. The profit spread narrows at the same moment your cash requirement rises. That double hit is what catches new flippers.
What Can the HOA Do to the Budget and the Timeline?
A lot. Windows, exterior doors, plumbing stacks, and structural changes are where HOA rules bite. Review the HOA documents early, before you commit to a scope of work, because the budget the lender accepts has to match work the association will allow.
Dues also belong on the cost side. Add dues, any special assessments, and holding time to your carrying-cost budget. A six-to-eighteen-month interest-only term is typical, so a slow rehab inside a building with strict contractor rules costs real money.
Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income. That matters if your fallback plan is to rent the unit.
What Does the Lender Want to See?
Think of two packages. The deal package covers the numbers. The building package covers the association.
- Deal package: purchase contract, scope of work with budget, ARV support, proof of your cash for the gap and reserves, and your project history.
- Building package: HOA budget and financial statements, dues and any pending assessments, litigation disclosure, the rules on renovation approval, and ownership mix in the building.
Collateral is non-owner-occupied residential, one to four units, and a condo unit typically fits that. Loan amounts run up to $5,000,000, with larger loans by exception and smaller balances varying by lender. All of it varies by lender, property, and experience.
Where Does the Loan Come In Smaller Than Expected?
Usually one of these.
- The ARV cap, not the cost test, was the binding constraint.
- A low appraisal cut the value test.
- The building showed warning signs and the lender trimmed leverage.
- You have fewer than two completed projects, so you land in the 85% tier.
- The rehab budget looked inflated or the scope was vague, so draws were limited.
- Closing costs and reserves came out of your cash, not the loan.
A tip from the brokering side: run both tests yourself before you make an offer. If value binds, negotiate price down or rethink the rehab.
What If the Flip Doesn’t Sell?
Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path. The building still matters there. A condo’s HOA health affects a rental refinance too, though the network’s own guidelines govern what it offers. DSCR compares rent to the full monthly obligation, 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. For the full picture, see the complete DSCR loans guide.
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 a hard money lender size a condo flip on purchase price or ARV?
Both, and the smaller result wins. The cost test applies a tier percentage to purchase price plus rehab, and every tier is capped at 75% of ARV. Which one binds depends on your margin. Wide margins let cost bind. Thin margins let value bind. Terms vary by lender, property, and experience.
How much cash will I need to bring?
Plan on the gap between the loan and total project cost, plus closing costs, reserves, and carrying costs such as HOA dues. At the 85%, 90%, and 93% of project cost tiers, the borrower funds the remainder, and a binding ARV cap raises that number. There is no true 100% purchase program.
Will a non-warrantable building hurt my loan?
It can, though not directly. The warrantability rules apply to your buyer’s financing, not your flip loan. Even so, litigation, heavy investor concentration, or low reserves can shrink your buyer pool and weaken the exit, so lenders may trim leverage or pass on the project.
Do I get the rehab money at closing?
No. Up to 100% of the rehab budget funds in draws against completed, inspected work. You cover early costs and are reimbursed as work is verified. Plan your cash flow around that schedule.
Can a first-time flipper get a loan on a condo?
First-time investors qualify at the lower leverage tiers, with a 620 minimum score and additional conditions below 660. Underwriting stays asset-based, so the property, plan, and exit carry weight. Nothing here is a commitment to lend.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income rather than personal income, subject to lender and program guidelines, a fit for self-employed investors and LLC-owned portfolios. Lendmire was recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
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References
1. Fannie Mae Selling Guide B4-1.2-01
2. Fannie Mae (document 14251)
3. Nav: Hard Money Loans and 100% Financing
4. Real Estate Skills: Condo Flipping
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 Sizes a Flip Without Income Documents · How a Hard Money Lender Sets the Down Payment on a Condo Bridge Loan · How Much a Hard Money Lender Will Lend on a Fix-and-Flip
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.