Please Help With Hard Money Numbers

[Daniel Vanhala]

Hi! I am currently doing my first live in flip. In the meantime, I have been saving in an attempt to acquire some rental properties.

Anyway, could someone please help clear something up for me? If a lender offers to pay 70% ARV and I find a house that is listed a $70k with an ARV of $100k - $115k, does that mean no down payment is required? I could cover closing and rehab costs. If you know of anyone that would provide this, please let me know. Thanks!

[Logan Singleton]

Hi Daniel, 

This is a very common question we get presented as lenders. Typically, most hard money lenders will finance 85% of the purchase price + 100% of the renovation costs, not to exceed 70% of the ARV meaning.

Purchase Price: $70K + Rehab: $15K 

ARV: $105K

The lender would fund 85% of 70k, which is equal to 59.5k plus the 15k rehab, so your total loan would be $74.5K, but our loan will not exceed 70% of the ARV, which in this case is 73.5K

Another thing to consider with these smaller loans is that most lenders have a minimum loan amount of $75,000.00, and the associated fees that come with these loans can become pricy compared to the loan balance.