How much can I borrow? The 70% ARV rule explained
With Prairie Stone Lending, you can borrow up to 70% of the property's after-repair value (ARV). If your purchase price plus rehab budget fits under that number, we can fund 100% of both. If it doesn't, you bring the difference.
The formula
Maximum loan = after-repair value × 70%
Then compare that number to your total project cost (purchase price + rehab budget):
- If your total cost is at or below the maximum, we can fund 100% of it.
- If your total cost is above the maximum, we fund up to the maximum and you cover the rest.
Example: fully funded
- Purchase price
- $90,000
- Rehab budget
- $40,000
- Total cost
- $130,000
- After-repair value
- $200,000
- 70% of ARV
- $140,000
The $130,000 total fits under $140,000, so the full purchase and rehab can be funded.
Example: some cash in
- Purchase price
- $90,000
- Rehab budget
- $40,000
- Total cost
- $130,000
- After-repair value
- $165,000
- 70% of ARV
- $115,500
Here the maximum loan is $115,500, so the investor brings $14,500.
Why lenders use 70%
The 70% limit leaves room for selling costs, holding costs, surprises in the rehab and changes in the market. It protects the lender, and it protects you from paying too much for a deal that doesn't leave a profit.
What else to plan for
- Closing costs: these are the borrower's responsibility, although some deals may qualify for $0 out of pocket.
- The value we use: ARV comes from closed sales of similar homes nearby, and we lend against the conservative end of that range. How ARV is determined.
- Rehab timing: rehab money is released in draws as work is completed, not all at closing. How draws work.
Want to check your own numbers? Use the calculator on our homepage, or Check my deal. Final approval and terms are determined during underwriting.