Run the deal before you call a lender. This sizes the loan the way an underwriter sizes it, then shows what the money actually costs and what is left when the property sells.
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Interest is estimated on funds actually drawn: purchase money for the full term, rehab money for about half of it, because draws are released as work is inspected. A lender charging on the full balance from day one would cost you .
DSCR compares gross rent to the full housing payment. Vacancy, management and repairs are not in the ratio, which is why a property can qualify on paper and still run thin in real life.
Three ceilings get calculated, and the smallest one wins. That is the whole trick, and it is why borrowers who budget off a single percentage are so often short at the closing table.
Loan to value measures against what the property is worth today, as it sits. Loan to cost measures against what you are putting into it, purchase plus rehab. Loan to ARV measures against what it will be worth finished. A lender advertising one hundred percent of cost still caps the same loan at seventy percent of ARV, so where the rehab is generous relative to the resale price, the ARV ceiling binds first and you bring the difference.
Move the two cap fields above and watch which one controls. When the ARV cap binds, more rehab spending does not get you more loan. It comes out of your pocket.
Every number above is a projection, and four things move them in the real world.
The appraisal. Your ARV is an opinion until an appraiser or a broker price opinion agrees with it. Come in ten percent under and the loan shrinks by seventy cents on every dollar of that miss.
The draw schedule. Rehab money is reimbursed after work is completed and inspected, not advanced before it starts. You need working capital to reach the first inspection, and that cash is not in the loan.
Days on market. The term is your real deadline. If the calculator says eight months and the house sits for five after a four-month rehab, you are into extension territory, and extension fees usually run about a point with the interest continuing.
The contingency you did not budget. Ten to fifteen percent on top of the rehab number is standard for a reason. Add it to the rehab field rather than discovering it in month three.
Take the defaults loaded above: a house at $185,000, $55,000 of rehab, $330,000 finished. Total cost is $240,000. Ninety percent of cost is $216,000. Seventy percent of ARV is $231,000. The cost ceiling is lower, so the loan is $216,000 and you bring $24,000, plus $4,320 in points and $3,500 in closing costs. That is $31,820 at the closing table.
Hold it eight months at 11.5 percent and interest runs about $14,500 on the funds actually drawn. Holding adds $3,600 and selling takes $26,400. Roughly $37,700 is left, on about $49,900 of your cash, which is a 76 percent return in eight months.
Notice what the calculator flags anyway: at $185,000 the purchase price sits $9,000 above the seventy percent ceiling. The deal is still profitable. That is the honest relationship between the rule and reality. It is a screen that saves you time, not a verdict.
Now change one number. Drop the ARV to $300,000, a single optimistic comp corrected. Profit falls from $37,700 to $10,700, and the cash you must bring rises from $31,820 to $37,700, because the ARV cap now binds before the cost cap and the lender advances less. A $30,000 error in your comps costs $27,000 of profit and demands $5,880 more of your own money.
On short-term flip and bridge financing, yes. Monthly interest, with the principal repaid in one balloon when the property sells or refinances. The DSCR tab is the amortizing one, because those loans are held for years.
One percent of the loan amount, paid up front at closing. Two points on a $216,000 loan is $4,320. It is a real cost of capital and it belongs in your profit math.
The seventy percent rule says your purchase price should sit below seventy percent of ARV minus rehab. If a deal fails it badly, the usual answer is that the purchase price is too high rather than that you need a more generous lender.
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1.25 gets the best pricing. Between 1.00 and 1.25 is approvable with pricing adjustments. Below 1.00 narrows the field considerably and generally requires reserves.
Answer these and we will tell you whether it is fundable, on what terms, and how fast it could close. Investment property only — we do not lend on a home you will live in.
We will run the numbers and come back to you. If it is time-sensitive, call 903-636-7511.
Dominion Hard Money arranges private and asset-based real estate financing for business purposes only. Not a commitment to lend. All loans subject to underwriting, property review, and approval. Terms vary by property, borrower experience, and exit strategy.