Frequently Asked Questions

ARV, or after repair value, is a real estate investing term used to describe an estimate of what a property will be worth after needed repairs, upgrades and renovations are done.

The 70% rule is a guideline in the real estate investing business that states no bid price at the beginning of a project should exceed 70% of the ARV minus estimated repair costs.

(ARV x 70%) – Estimated Repairs = Maximum Purchase Target

This is a rule of thumb that real estate investors should follow which will allow them to make a 30% return on their investment (ROI).

Rehab Financial uses a rule of 70% when it comes to lending on a project. Once RFG receives the ARV from the appraiser, we calculate 70% to determine the maximum that we are willing to lend.

After Repair Value x 70% = Maximum Loan Amount

That is the amount we will lend you towards your purchase and rehab costs. In many cases, this is enough financing to allow our borrowers to arrive at the closing table with zero cash down.

Here’s a basic example of calculating a maximum loan amount from ARV: If the ARV determine by the appraiser is $250,000, Rehab Financial will lend you 70% of that, or $162,500.

An owner can leverage their home equity in the form of collateral to secure either a home equity loan, a traditional home equity line of credit (HELOC), or a fixed-rate HELOC.

A home equity loan, sometimes referred to as a second mortgage, usually allows you to borrow a lump sum against your current home equity for a fixed rate over a fixed period of time. Many home equity loans are used to finance large expenditures, such as home repairs or college tuition.

A home equity line of credit (HELOC) is a revolving line of credit usually with an adjustable interest rate, which allows you to borrow up to a certain amount over a period of time. HELOCs work in a manner similar to credit cards, where you can continuously borrow up to an approved limit while paying off the balance.

Return on investment (ROI) is a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment’s cost.