The Quick Read: A hard money lender almost always wants an independent value opinion on a rehab purchase, and the lender cares about two numbers: what the property is worth today and what it should be worth once the work is finished. Your loan is sized against both, so the lower constraint usually decides how much cash you bring.
- The valuation type varies by lender. It can be a full appraisal, a desktop review or a broker price opinion.
- A rehab appraisal reports today’s value and the finished value (after-repair value, or ARV).
- Across our wholesale network, fix-and-flip leverage is stated as a share of project cost, and every tier is capped at 75% of ARV.
- A low appraisal shrinks the loan and raises the cash you bring to the table.
- Pressure-test your own ARV before you submit, because the appraiser builds the number independently.
Key Terms Defined
Appraised value: An independent opinion of what a property is worth, based on comparable sales and the property’s condition.
As-is value: What the property is worth today, in its current condition, before any repairs.
After-repair value (ARV): What the property should be worth once the planned work is complete. It is the finished value only. Repair costs are not added in.
Loan-to-value (LTV): The loan amount divided by a value. In hard money the word is slippery, because the value can be the as-is figure or the ARV.
Loan-to-cost (LTC): The loan amount divided by project cost, meaning purchase price plus rehab budget.
Broker price opinion (BPO): A lighter value estimate, often from a licensed agent or broker, built from comparable sales and a look at the property.
Subject-to-completion appraisal: An appraisal that values the property as if the repairs were already finished, based on your plans and budget.
Draw: A release of rehab funds after a portion of the work is completed.
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.
Does a Hard Money Lender Require an Appraisal?
Usually, yes, in some form. The lender is lending against a property, so it wants an independent opinion of what that property is worth. The form of that opinion changes from lender to lender.
Hard money loans are business-purpose loans for non-owner-occupied investment property. Because they are reviewed differently from a standard owner-occupied mortgage, appraisal practice is set by each lender’s funding source and risk appetite. Across our wholesale network, lenders that sell or pledge their loans to outside capital tend to want a full interior-and-exterior appraisal. Lenders lending their own money may accept a lighter product, especially on smaller or lower-leverage files.
When a lender advertises no appraisal, it usually means an internal valuation instead of no valuation. The lender still wants a number. It simply produces that number with a desktop review, a photo walk-through or a broker price opinion. Expect lower leverage in exchange for the lighter process.
Types of Valuation, Side by Side
| Valuation type | What it involves | Where it tends to appear |
|---|---|---|
| Full appraisal | Licensed appraiser, interior and exterior | Larger loans, higher leverage |
| Broker price opinion | Agent view built from sales comps | Cross-checks, smaller files |
| Desktop review | Comps and data, no site visit | Lower-leverage files |
| Photo walk-through | Photos and a short site look | Small or repeat-borrower deals |
Pick the full appraisal as your planning assumption. If the lender accepts something lighter, you gain flexibility. If the lender wants the full report, you are already prepared.
As-Is Value vs. ARV: Which Number Caps Your Loan?
Both numbers matter, and the lower constraint wins. On a rehab purchase, the appraisal reports as-is value and ARV. US Realty Training frames the split the same way: market value is today’s value, and ARV is the finished value. It also notes that ARV excludes repair costs. That detail matters when you work backward to a maximum purchase price.
Lenders do not simply lend against the bigger, finished number. A lender in one BiggerPockets thread says lenders generally size on the lesser of cost or ARV. That matches what we see in the network.
Here is how the pieces fit on the programs we place. These figures vary by lender, property, and experience, and nothing here is a commitment to lend.
| Constraint | Typical limit | Measured against |
|---|---|---|
| Fix-and-flip, 5+ completed projects | 93% | Project cost |
| Fix-and-flip, 2+ completed projects | 90% | Project cost |
| Fix-and-flip, fewer than 2 | 85% | Project cost |
| Every fix-and-flip tier | 75% cap | After-repair value |
| Bridge purchase, no rehab | Up to 80% | Purchase price |
Rehab money works differently from purchase money. Up to 100% of the rehab budget typically funds in draws against completed work. That is a rehab-budget figure, never a purchase LTV. There is no true 100% purchase program, and the top cost tier is reserved for experienced investors.
How the Appraiser Builds ARV
The appraiser builds ARV from renovated comparable sales, your scope of work and a stated assumption that the work is done. You do not control the number, and your own ARV estimate is not the appraiser’s ARV.
The process runs in a predictable order:
1. You submit the purchase contract, a line-item renovation budget, contractor bids and your own ARV estimate with comps.
2. The lender orders an as-completed appraisal to test whether your ARV is reasonable.
3. The planned repairs go to the appraiser, who forecasts value with those repairs in place.
4. The appraiser selects comps: recently sold, already-renovated homes nearby. US Realty Training suggests three to five comps, adjusted for differences.
5. The lender stress-tests the result. Comps must match the finished property’s type, size and finish level, not aspirational upgrades.
The appraiser values unfinished work through a stated assumption. Under the Uniform Standards of Professional Appraisal Practice (USPAP), the Appraisal Institute says every report must state its extraordinary assumptions and hypothetical conditions clearly and conspicuously. An extraordinary assumption is one that, if false, could change the appraiser’s conclusions.
McKissock, an appraiser education provider, adds that compliant disclosure takes more than boilerplate. The report must identify the hypothetical condition explicitly and note that its use may have affected the result.
What does that mean for you? The ARV holds only if the work gets done the way the plans describe it. Change the bedroom count, the square footage or the finish level mid-project, and the supporting value can slip.
One more practical point. Appraisers who do not see rehab deals often produce an ARV that misses the finished product. If you can influence who sees your file, ask your lender whether the appraiser is familiar with renovation projects.
Worked Example: One Deal, Two Appraisals
Run the numbers on a modeled deal, using index points instead of dollars. Assume your total project cost (purchase plus rehab) is 70 per 100 of your estimated ARV. Assume the 90% of project cost tier, which applies at 2+ completed projects. These inputs are illustrative assumptions, not market data.
| Per 100 of your ARV estimate | Appraisal supports ARV | Appraisal comes in 20% short |
|---|---|---|
| Project cost | 70 | 70 |
| Appraised ARV | 100 | 80 |
| 90% of project cost | 63 | 63 |
| 75% of ARV cap | 75 | 60 |
| Loan size (the lower one) | 63 | 60 |
| Cash you bring (cost minus loan) | 7 | 10 |
In the first column, cost is the binding limit. In the second, the ARV cap takes over and the loan shrinks. Your cash requirement rises by three points per 100 of ARV, and the spread between cost and finished value narrows from 30 points to 10. That thinner spread has to cover financing, holding and selling costs.
What a Low Appraisal Does, and Your Options
A low appraisal does three things at once: it cuts the loan, raises your cash in the deal and tightens your profit margin. The moment to find out is before you are committed, not after.
When the number comes in short, you generally have these options:
- Bring more cash. The loan shrinks to the lower limit, and you cover the difference.
- Renegotiate the purchase price. If the contract allows it, a lower as-is value is a strong argument for a lower price.
- Challenge the value. Submit better renovated comps or correct a factual error, such as square footage or bedroom count. Weak evidence will not move an appraiser.
- Trim or restructure the scope. A smaller budget with a more realistic finish level can make the ARV easier to support.
- Walk away. If the contract has an appraisal contingency, use it. Contingency timing is a contract matter, so build it in before you go under contract.
You can also pressure-test your own ARV before submitting. The 70% rule is a screening tool, not a loan rule. It caps your offer at 70% of ARV minus repairs. The Motley Fool shows a $250,000 ARV with $55,000 of repairs producing a maximum offer of $120,000. It also notes that some investors stretch their offers higher in busy markets, at greater risk. Keep in mind that on the programs we place, every fix-and-flip tier is capped at 75% of ARV.
The remaining 30% is not all profit. It has to absorb financing, holding and selling costs. Soft markets add pressure, because rising inventory, longer days on market and price cuts can reduce a realistic ARV.
Appraisal Requirements Checklist
The requirements fall into three groups: the appraiser, the property and what you provide.
The appraiser. Expect a state-licensed or certified appraiser. Lenders also expect the appraiser to carry professional insurance, though the exact standard varies by lender. The lender orders the report, not you. That keeps the opinion independent.
The property. Across our network, hard money collateral is non-owner-occupied residential property with 1-4 units, with ground-up construction allowed to 10 units. The property must be an investment property, not your primary residence. Apparent condition problems, such as foundation issues or unpermitted additions, can lower value.
- The purchase contract.
- A line-item rehab budget and contractor bids.
- Your ARV estimate with renovated comps.
- Photos of the property.
- Reliable access for the appraiser, including utilities where needed and a safe site.
Vacant or distressed properties raise access questions. If the appraiser cannot get in or cannot safely inspect, the report stalls or the value drops. Sort access out before the order goes in.
Who Orders It, Who Pays, and What Draws Have to Do With It
The lender orders the appraisal, and the borrower typically pays the fee, either upfront or at closing. That varies by lender, so confirm it before you apply. Whether the fee is refundable also depends on the lender and the outcome.
Do not confuse the appraisal with draw inspections. The appraisal sets value and loan size at the start. Draw inspections confirm completed work before each rehab release. One decides how much the loan can be. The other decides when money moves.
The Second Appraisal at Exit
If you plan to refinance after the rehab, expect a new appraisal. Hard money terms run 6-18 months with interest-only payments, and there are no multi-year options on the current program. Investors who need longer runway usually refinance out of hard money into long-term rental financing once the property is stabilized.
Lendmire brokers that path through select lenders in its network, and the complete DSCR loans guide explains how those loans are underwritten. The exit loan is sized on the new appraisal, never on your original ARV. An aggressive ARV on the front end can leave you short on the back end, and you would bring cash to the refinance.
On the programs we place, cash-out and rate/term refinances typically run up to 65% of value on the hard money side, which is a separate figure from the exit loan.
When the Requirement Is Lighter, and What It Means
A lighter valuation is a trade, not a loophole. Desktop reviews and broker price opinions tend to show up on smaller or lower-leverage files. Lenders compensate for the thinner evidence with less leverage. The risks on your side are real: you could overpay, or miss condition issues that a site visit would have caught.
Two other situations come up often:
- Flip versus hold. A straight rental purchase or bridge loan is sized on as-is value. A heavy rehab is sized with ARV in the picture.
- Owner-occupant rehab loans. Products such as FHA 203(k) require owner occupancy, so they are unavailable for investment purchases.
The valuation requirement also shapes your offer. If you are new and hoping to make a cash-style offer on a rehab, plan for the valuation step anyway. Build appraisal timing and contingency language into the contract before you commit.
What the Decision Looks Like in Practice
Strong files tend to do four things before they reach a lender:
1. Build a realistic scope and budget, with bids behind each line.
2. Pull three to five renovated comps that match the finished property, as US Realty Training suggests.
3. Check the purchase price against the as-is value, not only the ARV.
4. Run the low-appraisal case from the worked example and confirm the deal still works.
Credit matters too. Across our network, hard money files typically want a 620 minimum score, with additional conditions below 660. First-time investors qualify at the lower leverage tiers. Loan amounts run up to $5,000,000, and larger by exception. Underwriting stays asset-based, meaning it focuses on the property, the plan and the exit.
Frequently Asked Questions
Do hard money lenders always require an appraisal?
Most want some form of independent valuation. It may be a full appraisal, a desktop review or a broker price opinion. When a lender skips the formal appraisal, expect lower leverage in exchange.
Which value limits my loan, as-is or ARV?
Both do. The lender sizes on the lesser of the cost-based and ARV-based limits. On the programs we place, fix-and-flip loans are measured against project cost and capped at 75% of ARV, so whichever constraint is lower sets the loan.
Can I use my own ARV estimate?
Your estimate is the starting point, not the final figure. The appraiser builds ARV independently from renovated comps, and the lender treats it as a projection, not a guarantee.
What happens if the appraisal comes in low?
The loan shrinks to the lower limit, and you cover the gap. Your options include bringing more cash, renegotiating the price, challenging the value with better comps, trimming the scope or using an appraisal contingency to walk away.
Does the refinance at exit need another appraisal?
Yes. A new appraisal justifies value for the long-term loan. If your original ARV was aggressive, the exit appraisal can come in short.
Next Step
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 mortgage broker that arranges financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Program terms vary by lender, property, and experience, and nothing here is a commitment to lend.
About Lendmire
Lendmire — NMLS# 2371349 — is a DSCR and non-QM mortgage brokerage with investor loan programs in 41 markets, including Washington, D.C. DSCR eligibility is commonly reviewed by the lender around property-level rent rather than personal income documentation, subject to lender guidelines, and the brokerage helps arrange financing for LLC-owned portfolios beyond conventional financed-property limits. Recognized by Scotsman Guide as a Top Mortgage Workplace in 2025 and 2026.
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References
1. US Realty Training: after-repair value guide
2. BiggerPockets: lesser-of-cost-or-ARV lending thread
4. McKissock: basic appraisal reporting requirements
5. The Motley Fool: ARV formula
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 Preapproval Documents Before You Make Offers · Hard Money Project Loan Requirements for a Funded Rehab Budget · How Rehab Scope Changes the Contingency a Hard Money Loan Needs
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.