This week Kevin breaks down an example deal and explains some of the hard money loan metrics he uses to analyze them.
There’s a property for sale for $250,000 and it needs $50,000 in repair. The estimated ARV as presented by the investor is $400,000. Here we’re going to analyze the deal making sure the ARV (After-Repair-Value) is supported by comps. If everything checks out we take a look at our 2 lending metrics: LTV (Loan-to-Value) and LTC (Loan-to-Cost).
- For LTV we take 65% of the ARV, in this example $260,000.
- For LTC we take 80% of the total project cost, in this case $240,000.
The lower of the 2 is the LTC, so $240,000 is the amount that we would loan on this property.
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