Lending Terms

[Account Closed]

I am reviewing terms from this lending company and one of the terms says "will lend up to 65% of the “after built” value of the property which will require the borrower to have a cash investment roughly equal to 35% (case by case basis) of total costs to acquire, renovate and stabilize."   I am not sure what that mean, Please help 

[Nnabuenyi Anigbogu]

Is that the exact quote from the lender? I ask because that does not make sense. 

65% of "after built" i equate to 65% of the ARV (after repair Value). So if after you renovate the house is worth 100K, they will lend up to $65000.

However the second part (cash investment roughly equal to 35% (case by case basis) of total costs to acquire, renovate and stabilize.) is what is not clear to me. This usually refers to the project costs and not ARV. I.E if the house costs 40K to buy and 20K to fix you have to bring 35% of 40+20K (60K).

However the total they lend cannot be more than the $65000 (65%) of the ARV. so if you tried to buy the house for 60K with 30K renovation (and 100K ARV) they will lend up to 65K and you have to bring the rest yourself.

[Charlie Fitzgerald]

Welcome to the magical world of ARV lending...fuzzy math at its best. Precisely why we choose to lend on the as is value of the asset at acquisition (or contracted purchase price) plus a defined percentage of the estimated rehab costs, with a total loan not to exceed 90% of the purchase price (with some flexibility for the special cases where a borrower is buying an asset so far beneath the current value that it makes sense to be flexible).

[Account Closed]

@Nnabuenyi Anigbogu That was word for word from the lender, thank you for the feedback . i will defeinily get in contact with the lender again for further detail.