The Quick Read: After-repair value (ARV) is the number every hard money lender uses to size your loan. It’s not what the property is worth now. It’s what the property will be worth once the renovation is done. This works the same way whether you’re comparing hard money lenders in Tampa or anywhere else. Lenders cap your loan at a percentage of ARV. They fund rehab dollars in stages, not as one lump sum. And they expect you to refinance out once the property stabilizes. Get the scope of work wrong, and the appraised ARV comes in low. That shrinks your loan before you even close.
Key Terms Defined
After-repair value (ARV) is an appraiser’s opinion. It says what a property will be worth once a specific, disclosed renovation is complete.
Hard money loan is short-term, business-purpose financing secured by real estate. It’s sized mainly on the asset and the deal, not on the borrower’s income paperwork.
Loan-to-value (LTV) is the loan amount shown as a percentage of a property’s value. That value can be its current, as-is worth or its projected ARV.
Loan-to-cost (LTC) is the loan amount shown as a percentage of total project cost. Total project cost means purchase price plus rehab budget combined.
Scope of work (SOW) is the written, line-item renovation plan a borrower submits with the appraisal order. This document tells the appraiser what condition to appraise toward.
Draw schedule is the sequence of rehab payments a lender releases in stages. Each stage gets released once construction phases are inspected and verified.
DSCR (debt-service coverage ratio) compares a property’s rent to its full monthly obligation. That obligation includes principal, interest, taxes, insurance, and HOA dues where applicable. Lenders check this ratio when they qualify a rental refinance based on the property’s own income instead of the borrower’s paycheck.
How Does After-Repair Value Set Your Maximum Loan?
Hard money lenders don’t lend against just one number. They lend against two. The as-is value covers what the property is worth today, in its current, often distressed condition. The ARV covers what it’s worth after the renovation in your scope of work gets finished. Your maximum loan amount gets capped by whichever calculation the lender applies. That’s as-is LTV for the purchase piece, and ARV-based leverage for the total exposure once repairs get counted.
Trade press on this stays fairly consistent. A lender that caps as-is LTV around 80% will typically want ARV-based leverage closer to 65%-70% once the full renovation gets priced in, according to Scotsman Guide. That gap exists because the lender carries more risk during the rehab period than at closing. The property isn’t worth the ARV yet. It’s worth the as-is value plus a promise.
Lendmire’s own wholesale network runs differently than that trade-press baseline. Most fix-and-flip files land with leverage up to 85% LTV. The top tier gets reserved for experienced investors with a track record. On top of that, up to 100% of the rehab budget can get financed separately. That second number is a rehab-cost figure, not a purchase LTV. Don’t confuse the two. There’s no true 100% purchase-LTV program in the network. The real structure pairs strong purchase leverage with a fully financed renovation budget. It’s not a zero-down purchase against ARV.
ARV vs. LTV vs. LTC — What’s Actually Different
These three terms get mixed together constantly. Mixing them up is the fastest way to misread a term sheet.
| Metric | What It Measures | How It’s Typically Used |
|---|---|---|
| As-is LTV | Loan vs. current, pre-renovation value | Sizes the acquisition piece of the loan |
| ARV-based LTV | Loan vs. post-renovation projected value | Caps total exposure once repairs are counted |
| LTC | Loan vs. total project cost (purchase + rehab) | Shows how much of your own cash goes in |
A deal can look great on ARV and still fail on LTC if the rehab budget balloons. A deal can also look conservative on as-is LTV but still carry risk if the ARV comp set is thin. Read all three numbers together, not just one. That’s how an experienced file gets structured correctly from the start.
The 70% Rule (And Why the Network Runs Higher)
The “70% rule” is an old flipping heuristic. It says purchase price plus rehab costs shouldn’t exceed roughly 70% of ARV. That leaves a 30% margin for profit, holding costs, and appraisal error. It’s not a regulation, and no single agency enforces it. It’s trade-press shorthand that sticks around because a “true” hard money loan often caps out near 65% LTV or lower — without the fuller underwriting a securitized fix-and-flip program applies, per Scotsman Guide’s distinction between true hard money and fix-and-flip lending.
Programs sold on the secondary market apply tighter guidelines than that. They add sharper comp scrutiny, more documentation, and sometimes a minimum credit score. Across Lendmire’s network, leverage tops out higher than the old 70% heuristic on strong files. That’s up to 85% LTV on the property side, plus up to 100% of the rehab budget financed on top. This varies by lender, property type, and borrower experience. The rule of thumb works as a useful gut-check for flip math. It isn’t the ceiling on every program. Final terms depend on lender guidelines, property type, leverage, and the borrower’s full credit picture.
Why the Scope of Work Document Drives the Appraisal
This is the single most underrated mechanic in the whole process. The appraiser’s ARV opinion depends directly on what renovation plan gets submitted with the order, not just on the property itself.
Order an appraisal without a scope of work, and the appraiser has nothing to appraise toward except the current, distressed condition. The resulting ARV lands close to as-is value. That can kill deal economics before a shovel touches the ground. Submit a detailed, line-item scope of work before the appraiser visits instead, and comps get selected that reflect the post-renovation condition. That produces a much more workable ARV and a better yield on the deal. This is a documentation failure, not a market failure. It’s entirely within the borrower’s control. It’s the first thing an experienced file preparer checks before ordering.
Appraisers still grade actual, current condition on the industry-standard scale. A newly-built property lands at the top. Properties needing substantial rehab land at the bottom. The ARV opinion projects a hypothetical future condition. But the underlying appraisal still documents the real, current condition as the starting point.
How Rehab Draws Actually Get Released
Rehab dollars don’t show up as a lump sum at closing. They sit in a holdback account and get released in stages as work gets completed and verified. Most files structure this into three to five draws tied to milestones: framing or roof work, rough-in and interior finishes, then a final punch list. A third-party inspector confirms the completed work matches the scope of work before a draw funds. Interest generally accrues only on dollars actually disbursed, not on the full rehab budget sitting untouched in the account.
Here’s the part investors miss until it costs them. Contractors typically get paid out of the borrower’s own pocket for the current phase before a draw request even goes in for reimbursement. That means real working capital needs to sit outside the loan, ready before the lender releases anything for that stage. This is a structural feature of draw-based funding, not a flaw in the ARV math. It catches first-time flippers more than any appraisal issue does.
What Hard Money Structures Actually Look Like
Loan sizes across Lendmire’s network run from roughly $100,000 up to $60,000,000. Terms and structure vary by lender, property type, and the borrower’s experience level. Bridge loans typically run 6 to 12 months. Select programs offer 2-, 3-, and 5-year options for investors who want more runway. Repayment is usually interest-only through the term. That keeps monthly carrying costs down while the rehab is underway. The full balance comes due as a single payoff at the end, generally from a sale or a refinance.
Underwriting on these files is asset-based first. Property value, equity position, and the exit strategy carry more weight than a borrower’s traditional personal-income documentation. Credit minimums vary by program. Some carry no fixed floor at all. But that doesn’t mean approval is automatic. Every file still gets reviewed on its own merits. Collateral runs across residential investment property, small and large multifamily, commercial, industrial, land, and ground-up construction. This again varies by lender and program guidelines.
Where the ARV Math Breaks — Edge Cases Investors Miss
“True hard money” and “fix-and-flip loan” aren’t the same underwriting category. A relationship-based, asset-only hard money loan applies far less scrutiny to comps and documentation than a program built for the secondary market. The latter typically layers in a minimum credit score and disqualifies borrowers with recent bankruptcies or foreclosures. True hard money often has neither restriction.
An appraisal ordered blind produces a materially worse ARV. This got covered above, but it bears repeating as an edge case. It’s the most common, most preventable reason a deal’s numbers collapse between the LOI and the appraisal report.
Business-purpose classification isn’t automatic just because it’s a rental. DSCR and hard money loans are designed for non-owner-occupied investment properties. Because they’re business-purpose loans, they get reviewed differently from a standard owner-occupied mortgage. They generally fall outside the consumer disclosure timelines, like TRID’s closing-disclosure rules, that apply to owner-occupied purchases. Occupancy intent still matters, though. A loan on non-owner-occupied rental property gets treated as business purpose almost automatically. But any real intent to occupy the property personally can pull it back into consumer-lending territory, per Doss Law’s breakdown of the exemption.
Lender licensing varies by state in ways ARV math alone won’t reveal. Some states require no specific mortgage-lender license for business-purpose loans, regardless of collateral. Others carve out exemptions by property type or loan size. A given hard money shop’s licensing posture can shape which deals it’s willing to touch, independent of what the appraisal says.
Usury exemptions for business-purpose loans aren’t universal. Some states exempt investment-property lending from interest-rate caps outright. Others apply caps regardless of purpose. This is a real underwriting variable, even though it has nothing to do with the property’s ARV.
The draw-based structure creates a cash-flow trap unrelated to ARV accuracy. This got covered above. A perfectly accurate ARV won’t help if the borrower runs out of working capital between draws.
The Exit: Refinancing Out of Hard Money Into a DSCR Loan
Investors running a buy-rehab-rent-refinance strategy, rather than a flip, treat the ARV appraisal differently. For them, the appraisal ordered at the hard money stage isn’t the finish line. It’s the input for the eventual cash-out refinance. Once the rehab is complete and the property is stabilized, the exit typically runs through a DSCR loan. This loan qualifies mainly on the property’s own rental income covering the payment, subject to lender guidelines, not on the investor’s personal income documentation.
Cash-out DSCR refinances across the network typically top out around 75% LTV. Lenders generally expect roughly six months of seasoning on the property before they’ll consider the file. That means six months of ownership, generally, before the refinance can get structured. Coverage floors start around 1.00x on select programs. That’s a floor for specific programs, never a universal standard. Stronger ratios open better leverage and pricing tiers. Credit expectations run from a 620 floor on parts of the network up to around 660 on most programs. Scores of 700-plus unlock the strongest leverage available. Loan amounts on the DSCR side typically run up to $3,000,000 on standard programs, with smaller balances available through select lenders. Files above $2,500,000 generally settle into 30-year fixed structures rather than shorter-term or adjustable options. Reserve requirements vary by lender, leverage, and loan size. They commonly land around six months of the monthly housing obligation. Some conservative rate-term files under $1,500,000 waive this requirement, while larger loans step up toward nine months.
The appraisal on this side of the deal looks different from the ARV appraisal that got the hard money loan closed. Rather than projecting a post-renovation value, the DSCR lender orders a rent-focused appraisal. Industry convention borrows the Fannie Mae rent-schedule template as the standard format for documenting market rent on a single-family rental. An equivalent form covers 2-4 unit buildings. This is an appraisal form reference, not a signal that agency guidelines govern the DSCR loan itself. DSCR pricing and structure come from the lender’s own investor guidelines, not from GSE selling rules.
A bigger down payment on the refinance side lowers the monthly obligation and can lift the coverage ratio. But it never overrides a leverage cap, a credit floor, a reserve requirement, or a property-eligibility rule. The strongest refinance files clear two tests at once: enough equity at the stated LTV, and rent that comfortably clears the payment on its own. Clearing 1.00x isn’t the same as positive cash flow, either. Repairs, vacancy, management fees, and capital expenditures all sit outside the DSCR calculation, even on a file with strong coverage. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Some coverage-related programs in the network will consider ratios below 1.00, though leverage and terms adjust accordingly on those files. No-ratio qualification isn’t part of these programs, and that distinction matters when comparing quotes. Certain property types don’t fit any DSCR program in the network at all. Manufactured housing (single- or double-wide), log homes, and barndominiums are not offered, full stop, regardless of how the coverage math pencils.
Lendmire (NMLS# 2371349) arranges this refinance step through select lenders across a 40-market DSCR footprint spanning 39 states plus the District of Columbia. It works with LLC-titled borrowers on many of these files, subject to lender program eligibility. Investors evaluating the transition from a fix-and-flip or bridge loan into permanent financing can review the mechanics in more depth in Lendmire’s complete DSCR loans guide, or compare the refinance path directly against continuing to hold hard money debt through refinancing out of a hard money loan after a BRRRR strategy.
Review details are subject to lender overlays. Every scenario above is a range drawn from typical files across the network, not a quote and not a promise for any specific property. Loan approval is never guaranteed, and nothing here is a commitment to lend. Every scenario described is subject to lender approval and to borrower, property, and program guidelines. This article gives general information rather than financial, legal, or tax advice. Tax treatment can also depend on how the funds get used and how the property gets held. Investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Investors comparing options directly can call 828-256-2183 or request a quote to see how a specific property, credit profile, and leverage target line up against current network guidelines. For a broader look at how hard money lenders structure loans generally, Lendmire’s roundup of top hard money lenders and its directory-style guide to finding hard money lenders near you cover the shopping process in more depth.
Frequently Asked Questions
Does a low ARV appraisal mean the deal is dead?
Not automatically. A low ARV usually points to a documentation gap, often an appraisal ordered without a complete scope of work, rather than a bad property. Reordering with a full renovation scope, adding stronger comps, or requesting a second opinion can move the number. In some cases the loan simply gets resized to the appraisal that came in, and the investor brings more cash to close the gap.
Is a hard money loan the same thing as a fix-and-flip loan?
Not quite. True hard money tends to run with fewer guidelines and less rigid credit screening. Fix-and-flip programs sold on the secondary market apply fuller underwriting, tighter comp scrutiny, and sometimes a minimum credit score. Both size the loan off ARV, but they treat the appraisal and the borrower’s history differently.
Can I get 100% financing on a hard money deal?
“100% financing” almost always means 100% of project cost, which is purchase plus rehab, not 100% of the property’s value. Across Lendmire’s network, purchase leverage tops out around 85% LTV on the strongest files. Up to 100% of the rehab budget can get financed separately on top of that, and this varies by lender and borrower experience. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
How does the ARV appraisal from my hard money loan connect to my eventual refinance?
It’s the foundation, not a duplicate. The hard money lender’s ARV appraisal establishes what the property is worth once renovated. The DSCR refinance later orders its own rent-focused appraisal to document market rent for qualification. Both use the finished, renovated property as their reference point: one for value, one for income.
What credit score do I need to qualify for a hard money loan?
It depends heavily on the program. True hard money loans in parts of the network carry no fixed credit floor at all. Fix-and-flip programs built for the secondary market often set a minimum score. Asset value, equity position, and exit strategy typically carry more underwriting weight than the credit profile on these files.
This article is for general information only and isn’t financial, legal, or tax advice. Program terms, leverage limits, and eligibility criteria vary by lender and change without notice; nothing here is a commitment to lend, and all financing is subject to lender approval and full underwriting of the borrower, the property, and the specific program.
Many investors treat hard money as the acquisition tool and plan the exit up front – see refinancing out of a hard money loan with a DSCR loan.
Program availability, loan terms, and eligibility are subject to lender guidelines, credit approval, property review, and full underwriting. This article is educational and is not a loan offer or commitment to lend.
About Lendmire
Lendmire is a DSCR and non-QM mortgage broker. Lendmire — NMLS# 2371349 — connects investors with wholesale lending channels across 40 markets, including Washington, D.C. The property’s rental income, not the borrower’s tax returns, sits at the center of lender review. This works for self-employed operators and portfolios beyond four financed properties. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Many investors treat hard money as the acquisition tool and plan the exit up front – see how DSCR loans work as the long-term exit.
References
1. Scotsman Guide – Take a Tutorial on Hard Money Loans
2. Scotsman Guide – Stop the Confusion for Investor Clients
3. Doss Law, PC – Business Purpose Exemption Simplified
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- 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.
