Plan for more than the down payment. Your cash requirement includes the portion of the purchase and rehab budget the loan does not cover, closing costs, reserves, and money needed before rehab draws arrive. The lender may limit the loan by both project cost and after-repair value, using the tighter limit.
What Is the Difference Between LTC and ARV?
Loan-to-cost (LTC) compares the loan with eligible project costs. After-repair value (ARV) is the estimated value once the planned work is finished; loan-to-ARV compares the loan with that value. A strong resale estimate does not by itself tell you how much cash you need.
How Do Those Limits Change My Cash Requirement?
A $250,000 Purchase With a $50,000 Rehab
Assume $300,000 of eligible costs and a $400,000 ARV. If a hypothetical lender allows 85% LTC and 70% of ARV:
- 85% × $300,000 = $255,000.
- 70% × $400,000 = $280,000.
- The tighter limit is $255,000.
- Project costs less the total loan leave a $45,000 gap, before fees, reserves, and timing needs.
These percentages are assumptions to explain the math, not advertised Propello terms.
If the entire $50,000 rehab allocation is held back, only $205,000 is available toward the purchase in this example. The $45,000 gap is not the same as having enough cash to operate the project.
Do I Receive All the Rehab Money at Closing?
Not necessarily. Rehab funds may be released in stages after documented progress and inspections. Confirm whether you must pay for work first, what documentation is needed, and how long reimbursement takes. Lima One’s draw-process explanation illustrates why the total loan commitment and cash available today are different.
What Costs Should I Budget Beyond the Purchase?
Build a separate cash plan for lender and broker charges, title and settlement costs, insurance, interest, taxes, inspections, and any required reserves. Keep a contingency for work that costs more or takes longer than expected. If you plan to sell, include selling costs in your profit estimate rather than treating the full resale price as proceeds.
Ask whether interest applies to the full commitment or only disbursed funds, and what extension or early-payoff charges could apply.
What Can I Prepare Before Requesting a Quote?
Have the purchase contract or asking price, address, itemized rehab budget, expected resale value with supporting comparables, contractor plan, target dates, and available cash ready. Include your project experience honestly. A quote based on an incomplete scope may change once the work is reviewed.
See fix-and-flip funding options. If the goal is to keep the property, also review how rehab financing can lead to a rental loan.
Educational information, not a loan offer. Eligibility and terms depend on the program and review of your situation. Examples are illustrative.