The Quick Read: A hard money lender sizes a 2-4 unit flip loan as the lesser of two numbers: a share of total project cost, set by your completed-project count, and a cap on after-repair value (ARV) that tops out at 75% of ARV on the program Lendmire places, subject to lender guidelines. Whichever number is lower is the loan. The gap between that loan and your total cost is the cash you bring.
- Leverage runs 85% of project cost with fewer than 2 completed projects, 90% at 2 or more, and 93% at 5 or more. Every tier is capped at 75% of ARV.
- Up to 100% of the rehab budget funds in draws against completed work. It is not a purchase LTV and it does not arrive at closing.
- No program funds 100% of the purchase price. Closing costs, the first draw, and carry sit on top of your equity.
- Loans reach up to $5,000,000, with 6-18 month interest-only terms. All of this varies by lender, property, and experience.
Most investors ask for a single percentage. The honest answer is two tests, and on multi-unit deals the second one binds more often than people expect.
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.
How Is the Loan Actually Sized?
The loan is the lesser of a cost-based amount and an ARV-based amount. The cost test multiplies a leverage percentage by purchase price plus rehab budget. The ARV test multiplies the after-repair value by the cap. The lender funds whichever result is smaller.
That is why a single “LTV” figure misleads on flips. Generic hard money pages often quote a percentage of property value. Flip lenders work from cost and ARV together. Both views are true. They answer different questions.
The cost test tells you how much equity the lender expects at the buy. The ARV test tells you whether the finished building supports the debt. A deal bought at a deep discount rarely hits the ARV cap. A deal bought near market value hits it almost every time.
Experience moves the cost test. Fewer than 2 completed projects lands at the 85% tier. Two or more moves to 90%. Five or more reaches 93%. The top tier is reserved for experienced investors, and exact tiers vary by lender, property, and experience.
Key Terms Defined
Loan-to-cost (LTC): The loan divided by purchase price plus rehab budget.
After-repair value (ARV): What the finished property is worth once the work is done, supported by comparable sales.
Loan-to-ARV (LTARV): The total loan divided by ARV. This is the cap that most often limits a flip loan.
As-is value: What the property is worth today, before any work.
Holdback: Rehab money the lender keeps in escrow instead of paying out at closing.
Draw: One release of holdback money after a phase of work is finished and checked.
What Does Underwriting Do With a 2-4 Unit File?
Underwriting follows the same order on most files across the wholesale network. Each step feeds the next.
1. Collect the inputs. The lender needs the purchase price, the rehab budget, an ARV estimate, your completed-project count, your credit, and a written exit plan. Credit starts at a 620 minimum, with added conditions below 660.
2. Run the cost test. The lender applies your tier percentage to purchase plus rehab. That gives the first ceiling.
3. Run the ARV test. The lender applies the 75% cap to ARV. That gives the second ceiling.
4. Fund the lower number. If cost sits well under the ARV ceiling, the loan follows the cost test. If cost sits near ARV, the cap cuts the loan and you fund the difference.
5. Split the loan. An initial advance goes to the purchase at closing. The rehab portion is held back and released in draws.
6. Order the appraisal. For a 2-4 unit, the report needs both an as-is value and a subject-to-completion ARV. Those two values feed the two tests.
7. Check the entity and the file. Flips are often bought through an LLC, subject to lender program eligibility.
The loan is asset-based. The property, the plan, and the exit drive the decision. Credit and experience still set leverage, so this is not a loan that ignores the borrower.
A Modeled Example: Which Test Binds?
Run the numbers on one building with an ARV of 100%, and express everything as a share of ARV. These are modeled assumptions, not market data. The point is to show when each test governs.
| Deal | Tier | Cost-test loan | Loan after 75% cap | Your share of cost |
|---|---|---|---|---|
| Cost at 70% of ARV | 85% | 59.5% | 59.5% | 10.5% |
| Cost at 70% of ARV | 93% | 65.1% | 65.1% | 4.9% |
| Cost at 85% of ARV | 85% | 72.25% | 72.25% | 12.75% |
| Cost at 85% of ARV | 90% | 76.5% | 75% | 10% |
| Cost at 85% of ARV | 93% | 79.05% | 75% | 10% |
| Cost at 95% of ARV | any | above 75% | 75% | 20% |
Read the table in two halves. When all-in cost is 70% of ARV, experience matters. A higher tier cuts your cash directly. When all-in cost is 85% of ARV, the 90% and 93% tiers land on the same loan, 75% of ARV, because the cap cuts both. Extra experience buys nothing once the ARV cap binds.
The last row is the thin-margin deal. With all-in cost at 95% of ARV, the loan stops at 75% of ARV no matter the tier. You fund the rest. Thin margins do not disqualify a deal by themselves, but they raise your cash need sharply.
The table excludes closing costs, carry, and reserves. Those come on top.
What Do You Actually Bring to Closing?
Cash due at closing is higher than the word “down payment” suggests. It covers the gap between the initial advance and the purchase, plus closing costs. It also covers early rehab costs, because holdback money is paid after work is done.
Here is the cash timeline in order:
| Stage | What you fund |
|---|---|
| At closing | Equity gap, closing costs |
| Before first draw | Early rehab, contractor deposit |
| During draws | Cost overruns, carry |
| Exit | Any shortfall at sale or refinance |
Up to 100% of the rehab budget funds in draws against completed work. That is a rehab-budget figure. It never means the loan covers 100% of the purchase. Contractors often want a share of the budget up front, and inspections take time to schedule. Plan a cash buffer for that gap. Reserves requirements vary by lender and file.
Two things surprise newer investors here. The first is that rehab money is reimbursed, not advanced. The second is that interest accrues while you wait for inspections. Build both into the budget before you submit.
Why Does a 2-4 Unit Size Differently?
A 2-4 unit is appraised as an income property, not a single-family home. The standard report is Form 1025, listed in the Fannie Mae Selling Guide as the appraisal form for 2-4 unit properties. That reference supports the form name only. Lender programs set their own rules.
The 1025 includes a rent analysis and rent comparables. Realvals notes it is often paired with the 1007 and 216 forms. For a flip, that means rent evidence is part of the file even when you plan to sell.
This changes ARV risk in three ways:
- ARV rests on sales of renovated 2-4 unit buildings. Those comps are scarcer than single-family sales.
- A thin comp set can pull the ARV down. A lower ARV lowers the 75% cap, and the loan drops with it.
- Rent support matters. If you plan to refinance, the finished rents shape the exit.
An improvement may support a higher appraised value, depending on comps and underwriter review. It does not add a fixed amount. Build your ARV on closed sales, not on the rehab budget.
Collateral is non-owner-occupied residential property of 1-4 units. These are business-purpose loans. Program scope varies, so a 2-4 unit that one lender treats as a flip may be routed differently by another.
Where the General Rule Breaks
The lesser-of rule holds on most files. These cases bend it.
The ARV cap binds when the buy is not deep enough. If purchase plus rehab sits close to ARV, the lender cuts to the cap and you fund the gap. Higher leverage tiers do not help here, as the table shows.
Rehab scope can matter. A large rehab against a modest purchase price draws a closer look from lenders. A heavy budget needs a clear scope of work and a supported ARV.
Small loans behave differently. Smaller balances vary by lender, and some lenders set minimums or adjust terms on them. Loans run up to $5,000,000, with larger amounts by exception.
Value basis can differ. A lender may size on value instead of price when you buy well under value. That can change the cost test. Do not count on it.
Experience is documented, not claimed. The tier follows completed projects you can show. A year of rehab work without closed projects still sits in the lower tier.
Credit below 660 adds conditions. The 620 minimum is a floor, not a promise. Conditions apply below 660, and first-time investors qualify at the lower leverage tiers.
Ground-up and bridge deals use different tests. A purchase with no rehab tops out at 80% of purchase price. Ground-up construction reaches 90% of cost and 75% of completed value at 3 or more completed projects. Cash-out and rate-and-term refinances reach 65% of value. Those are separate structures from a standard flip.
Common Misreadings
They lend 70% of purchase price. No. The caps sit on total cost and on ARV, and they work together.
100% financing means no money down. No. The 100% figure applies to the rehab budget only, funded in draws. Closing costs, the first draw, and carry still come from you.
Rehab money arrives at closing. No. It is held back and released after inspected work.
Hard money ignores the borrower. No. Experience and credit set your tier and your conditions.
The same appraisal works for any property. No. A 2-4 unit uses the 1025, which carries rent analysis a single-family form does not.
Exit: Sell or Refinance?
Terms run 6-18 months, interest-only, with no prepayment penalty. There are no multi-year options on this program. You repay by sale or by refinance.
For a 2-4 unit, the refinance depends on the finished rents. Many investors refinance out of hard money into long-term DSCR financing once the property is stabilized, and Lendmire brokers that path. A DSCR refinance qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. The complete DSCR loans guide walks through how that works.
If a rental exit is possible, rehab for rentable units. A sale exit needs strong comps. A rental exit needs strong rents. Many deals need both to hold up.
Tax treatment varies; consult a qualified professional.
What Does the Decision Look Like?
Test a deal before you submit it. Start with all-in cost as a share of ARV. If it sits near 70%, the cost test likely governs and your tier matters. If it sits near 85% or higher, the ARV cap likely governs and your cash need rises.
Then check these:
- Are there at least a few closed sales of renovated 2-4 unit buildings to support the ARV?
- Does the rehab scope match what those comps show?
- Can you cover the first rehab costs and carry before draws start?
- Do you have a written exit, sale or refinance?
- Do your completed projects match the tier you are counting on?
If the answers hold, the loan lands where the math says it should. If one fails, adjust the purchase price or the scope before the appraisal, not after.
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 arranging financing through select lenders in its wholesale network, across 41 markets including Washington, D.C. Nothing here is a commitment to lend, and every file is underwritten individually. You can request a quote at 828-256-2183.
Frequently Asked Questions
How much will a lender fund on a 2-4 unit flip?
It funds the lower of two amounts. One is 85%, 90%, or 93% of project cost, depending on completed projects. The other is 75% of ARV. Loans reach up to $5,000,000, and every figure varies by lender, property, and experience.
Can a hard money loan cover 100% of the deal?
Not the purchase. Up to 100% of the rehab budget can fund in draws against completed work. The purchase still needs your equity, plus closing costs and carry.
Is the rehab money paid up front?
No. It sits in a holdback and is released draw by draw after each phase is finished and checked. Plan to front early costs and get reimbursed.
Do I need flipping experience?
Not necessarily. First-time investors qualify at the lower leverage tier, which is 85% of project cost. Two completed projects move you to 90%, and five move you to 93%.
What happens if the ARV comes in low?
The 75% cap falls with it, and the loan falls too. You fund the larger gap. Request a reconsideration with better renovated-sale comps if the appraisal misses the evidence.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage focused on DSCR investor financing, helping arrange programs through wholesale and investor-lending channels in 41 markets, including Washington, D.C. DSCR loans are evaluated by the lender on property cash flow rather than personal income, subject to lender guidelines, supporting LLC closings and accommodating investors with four or more financed properties. Scotsman Guide Top Mortgage Workplace in both 2025 and 2026.
Short-term financing tends to work best when the long-term plan is decided early – see the hard money loan overview.
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References
2. Realvals, Real Estate Appraisal Forms
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 to Meet Hard Money Requirements on Your First Fix-and-Flip · National vs Local Hard Money Lender for a Fix-and-Flip Investor · How Much Down Payment a Hard Money Lender Requires on a Flip
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.