Specialist · Tulsa, OK · Member since 2014 · 25 posts · 11 votes
I found a property for $220k , which needs approximately $60k in rehab. The lender said they would loan 80% Loan to Cost or 70% ARV. If ARV is $350k, then the lender would lend on the lower of the two I assume? Which would be 80% Loan to cost or $220k + $60K = $280K x 80% = $224k. If the purchase price is $220k does that mean I dont have to come to the table with any money, aside from closing costs? I would just have to pay rehab costs?
Typically yes. However, a hard money loan is a private loan so the lender can set terms as they like and you can decide if you want to accept them.
How does the lender know what's reasonable in regards to rehab costs ? What's to stop me from hypothetically inflating rehab Costs to increase overall loan to cost and subsequent loan amount ? Does the appraiser/appraisal determine if rehab costs are reasonable?