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How to calculate your offer like a direct hard money lender
Ryan G. WrightDec 8, 2011 11:25:36 PM2 min read

How To Calculate Your Offer Like Direct Hard Money Lenders

Think Like a Direct Hard Money Lender

Here’s a question I just got that is fairly common:

“Hard money lenders lend 70% of market value after repair.

What percentage of repair cost should I add to present market value to calculate my offer price?”

– Matt

Dear Matt,

The first thing you have to do is think about your purchase (offer) price and your repair costs as two separate buckets of money.

Direct hard money lenders will finance up to 100% of both of those buckets, as long as together they equal less than 70% after repaired value.

But that doesn’t mean that you get one big check to close the deal…

A hard money lender will give you a certain amount of financing toward the purchase price at closing and any repair money will be put into an escrow account post closing.

So in a perfect world, you’d add in 0% of your repair costs into your offer for the property.

Let me explain.

You need to figure out what repairs you want to do to the property and get estimates first.  Then determine the ARV.

Take 70% of the ARV, then subtract your repair estimates.

This would be the max that you can offer and still get fully financed for both the purchase and repair costs.

However you have to be extremely diligent with your repair estimates and ARV calculations.

The final amount you get will be based on the direct hard money lenders determination of the ARV and amount of repair costs – not yours.

This could be, and often is quite a bit different than what an investor calculates.

At we use two different independent expert property evaluators when looking at a property to determine the ARV and repair estimates.

Between the two of them they submit back to us 18 comps to look at with their values.

This system allows us to be highly accurate with our ARV and repair determinations.

Now if you are ok with putting some of your own money down or into the repair costs, then you can adjust your offer price according to what you are willing to come out of pocket with.

Keep in mind that you are going to have fees due at loan closing that are not financed by direct hard money lenders.  This will range from 4-6% of your total loan value.

The moral of the story is that you’ll need to put in a LOT of offers before you get the numbers to make sense.

But I can assure you that you will find that right property and when you do, it makes it all worth your time and effort!