How it works
Two limits apply at once: a percentage of total project cost and a percentage of the after-repair value. Whichever binds first sets your loan. Terms run 6 to 24 months, usually IO, with the exit being a sale or a refinance into a DSCR loan. Experience moves leverage more than credit does.
Purchase price is $300,000, rehab is $100,000 and expected after-repair value is $550,000. Total cost is $400,000. A rehab lender may test both loan-to-cost and loan-to-ARV; whichever limit is tighter can control the loan amount.
Who it can work well for
Flippers, BRRRR investors, and anyone who needs to close fast on a property no conventional lender will touch in its current condition.
What lenders actually look at
The lender studies purchase basis, rehab budget, ARV, LTC, LTARV, borrower experience, liquidity, credit, contractor/project plan, timeline and exit strategy. Rehab funds are usually advanced through draws.
Illustrative lender guidelines
These are educational examples, not universal approval rules. Exact requirements and maximum leverage vary by lender and complete scenario.
| Scenario | Credit / qualifier | Illustrative leverage |
|---|---|---|
| Experienced, 5+ deals | 680+ | 90% LTC / 75% ARV |
| Some experience, 1-4 | 660+ | 85% LTC / 70% ARV |
| First-timer | 680+ | 80% LTC / 70% ARV |
| Term | — | 6-24 months |
| Rehab funds | — | Draw reimbursement |
What to watch for
You front each renovation phase and get reimbursed after inspection, so working capital matters as much as the loan. Budget for carrying costs beyond your optimistic timeline.
Common misconception: “90% financing” automatically means only 10% cash is needed. Rehab escrows, interest, closing costs, points, required liquidity and the lender’s ARV cap can materially change cash required.
When this may not be the best choice
A short-term flip loan may not be best for an owner occupant, a long hold with no refinance exit, or a stabilized rental that can go directly into DSCR/conventional financing.
Common questions
Related programs
Want to see what may fit your scenario?
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