How do LTC and ARV limits work on a fix and flip loan?

Question

Silt Capital · Accepted Answer

A fix and flip loan is capped by two tests at once — loan-to-cost and loan-to-after-repair-value — and the loan is the lower of the two. Silt lends up to 90% of total project cost, meaning purchase price plus rehab budget, and up to 70% of the after-repair value the appraiser supports. Take a $300,000 purchase with a $100,000 renovation and a $520,000 ARV. Cost is $400,000, so 90% LTC allows $360,000; 70% of ARV allows $364,000. The loan is $360,000, and you fund the remaining $40,000 of cost. The ARV test protects against overpaying for the property; the cost test keeps the investor's own money in the deal. A thin spread between cost and ARV is usually what limits leverage, not the percentage itself.

How do LTC and ARV limits work on a fix and flip loan?

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