April 29, 2024 | Reading Time: 1 Minute
If you are looking to fix and flip a project and need a hard money lender, they will loan you up to 90% of the purchase price and 100% of the renovation costs. However, the total amount is capped at 75% LTV (loan-to-value) of the after repair value (ARV) of the property.
Let’s break it down with the following example. The ARV of the property is $200,000 and your purchase price is $100,000 with $25,000 needed for repairs. The lender will loan you $135,000 total ($90,000 + $25,000). The total does not exceed the 75% LTV cap limit of $150,000 so you are fully funded. You need only to bring $10,000 (this is 10% of the purchase price) plus closing costs to the table.
However, let’s say the ARV of the same property was only $140,000. The lender will cap you at 75% total or $105,000. This means the lender will loan you only $80,000 for the acquisition (80% LTV) with the $25,000 renovation costs still included. You would then need to bring $20,000 plus closing costs to the table. Confused? Don’t be. Contact loans@reibrokers.com to set up a free consultation call to discuss all your hard money questions and needs.