Southern California Deal
If I can purchase the property for 270k and the resale value is 400-410k after 50k in upgrade.
Does this seem like a doable deal. Unfortunately, I do not have the cash-in funds atm. What would you do?
Given
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Purchase Price: $270,000
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Rehab / Upgrades: $50,000
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All-in Cost: $320,000
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After Repair Value (ARV / Resale Value): $410,000
1️⃣ ARV (After Repair Value)
This one is straightforward:
ARV = $410,000
2️⃣ LTV (Loan-to-Value)
LTV depends on what amount is being financed. I’ll show you the two versions lenders typically look at.
🔹 A. LTV Based on Purchase Price
(Common for conventional or some hard money lenders)
If the loan covers the purchase only:
LTV=Loan AmountPurchase PriceLTV = \frac{Loan\ Amount}{Purchase\ Price}LTV=Purchase PriceLoan Amount
Assuming a full purchase loan of $270,000:
LTV=270,000270,000=100%LTV = \frac{270,000}{270,000} = 100\%LTV=270,000270,000=100%
➡️ 100% LTV (purchase-based)
🔹 B. LTV Based on ARV (Most Important for Hard Money)
(This is the number lenders care about most)
If the lender looks at the total loan vs ARV:
Assuming loan covers purchase + rehab = $320,000:
LTVARV=320,000410,000LTV_{ARV} = \frac{320,000}{410,000}LTVARV=410,000320,000
LTVARV=78.05%LTV_{ARV} = 78.05\%LTVARV=78.05%
➡️ ≈ 78% ARV LTV
3️⃣ Deal Snapshot (Investor View)
| Metric | Amount |
|---|---|
| Purchase | $270,000 |
| Rehab | $50,000 |
| Total Investment | $320,000 |
| ARV | $410,000 |
| Gross Spread | $90,000 |
| ARV LTV | ~78% |
4️⃣ How Lenders Will React
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Many hard money lenders prefer ≤70–75% ARV
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At 78% ARV, this is:
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Still financeable
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Likely requires:
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Small cash-in (≈ $12k–$20k), or
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Rehab holdback / draws, or
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Slightly higher rate/points
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5️⃣ What This Means Strategically
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Your purchase price is strong at $270k
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The deal works, but tightening one variable improves lender terms:
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Lower rehab to ~$45k OR
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Push ARV to ~$420k OR
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Bring $15k cash to closing
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