ARV HARD MONEY LOAN ?

Question

Hey everyone ! I am in the process of finding and analyzing deals to do my first flip. I just found and went to look at a deal where the rehab will require more funds than what me and my partner have saved up. We were planning on using hard money from several contacts we have already made, but we only wanted to obtain a percentage for the purchase price. If I go along with this deal I would need some extra funding for rehab. I wanted to ask how hard money lenders usually lend for ARV. I have heard they will do for example, 80% of the purchase price and 70% of the rehab. Is this accurate ? and usually how do they go about disbursing the funds ?

Any tips, suggestions or guidance will be very much appreciated. If you need more specifics on the deal please let me know and ask away. Thanks in advance !!!!

Jay Hinrichs · Answer

right now uber competitive for good borrowers in the HML space.

so for top tier clients we see 90% of purchase and 100% of rehab up to 70 to 75% ARV.

so start there and work your way down.

Daniel Vanhala · Answer

I know this is an older post, but if you still work with the lender, could you please send me their information? Thanks!

Kayin Lawrence · Answer

@Justin Dillon that is a very useful. Would you be willing to provide that lenders information to me as well?

Robins Dorvil · Answer

Do you mind sharing the lender you use? PM me if you don’t mind. Thanks in advance.

Justin Dillon · Answer

I work with a lender that lends up to 70% of VALUE, not Purchase Price.  For example, if I find a fixer home that has an as-is value of $200K but I negotiated a price of $140K, I would essentially be able to get 100% financing!  My lender would verify the $200K value by getting a BPO or CMA from a local trusted real estate agent but those are cheaper than an appraisal and only take a couple days.  The lender knows full well that the home may not be bank financeable but they also know that there is a value for everything so they are willing to lend on the current as-is value regardless of condition.  It is huge for me as I can finance several properties at once.

Jose Trujillo · Answer

@Caleb Jordan @Jay Hinrichs That pretty much answers my question. Thank you very much guys !

Caleb Jordan · Answer

It will vary lender to lender. But usually they will fund a percentage of purchase price and rehab, but then be capped at an ARV percentage.

Example 80% of purchase and rehab or 75% of ARV whichever is lower.

The rehab funds are usually put aside in escrow account and you begin rehab with your own funds. As you complete work you request a draw and the money is disbursed in increments so you get reimbursed for your out pocket expenses and can keep going. Usually you'll have to give the lender a plan of what you are doing for a rehab and will have to stick to that plan to get money.

For some lenders money is disbursed per line item like floors, electrical work etc. For others it is disbursed  on overall percentage completed.

ARV HARD MONEY LOAN ?

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