Flushing, NY · Member since 2013 · 221 posts · 29 votes
I have a property that was apprised for 200000, I went to a hard money lender and it seems that they will only lend 181000 on the property. This tosses off my numbers significantly. Do all hard money do this? What can I do to work around this issue?
Lenders will never lend the full ARV. If a lender is basing their loan amount on ARV, for the most part, it will never be above 75% of the ARV. Most lenders base their loan amounts on the current value and usually do not lend above 65% of the current value.
All lenders are going to lend you less than the property is worth. In the event that they have to foreclose on someone they want to ensure that they can cover the amount of the loan. If you think it's worth 200, you're buying for 100, and the rehab amount is 40 they're not going to lend you more than 200. Typically they'll have a percentage amount the lend out up to but are going to want to see you bring some cash to the table.
There are 100% LTC lenders out there. But they usually will only lend upto 90% LTV (Loan to Cost, and Loan to Value). Be sure that you find the right lender. Of course LTC may be limited due to your track record also.
Lenders will never lend the full ARV. If a lender is basing their loan amount on ARV, for the most part, it will never be above 75% of the ARV. Most lenders base their loan amounts on the current value and usually do not lend above 65% of the current value.