When it comes to real estate finance, maximizing returns is always a priority. For mortgage brokers, private lenders, and referral partners, how After Repair Value (ARV) works can be a make-or-break for your business. ARV is an important indicator used to gauge the potential profitability of a property once it is renovated or improved. By educating your clients on ARV and offering the appropriate financing solutions, you can deliver value while building your own business.
Here's how ARV operates and how you, as a wholesale lending partner, can use it to serve your customers better and grow your lending business.
Before diving into how ARV can benefit your clients and your business, let’s clarify what it means:
After Repair Value (ARV) is an approximation of a property's value after renovations or improvements have been made. It takes into account the current condition of the property, the extent of renovations to be done, and the market value of similar properties in the neighborhood.
For private lenders and mortgage brokers, ARV is an important metric when structuring new construction loans, rental property rehabilitation loans, and fix-and-flip loans. By advising borrowers on how to properly calculate ARV and how to obtain the proper loan products, you are positioning yourself as a go-to expert in real estate investing.
As a third-party originator or wholesale lending partner, providing solutions that maximize ARV can translate to improved loan performance and repeat business. Here's how you can include ARV in your lending strategy:
Miscalculated ARV can result in underfunded projects or financial loss. By providing education to your clients—real estate developers and investors—on how to properly calculate ARV, you help them make informed investment decisions.
Encourage your clients to:
As a broker or lending partner, you can offer guidance on how ARV impacts loan terms and what lenders look for when assessing risk.
In organizing loans, ARV can be used to set the appropriate loan amount and the loan-to-value (LTV) ratios. Most fix-and-flip lenders advance loans as a percentage of the ARV, not the purchase price.
For example:
By understanding ARV-driven lending models, you can connect your clients with financing that aligns with their project needs.
Profitability is achieved when you remain within budget, which every successful real estate investor understands. As a lender or broker partner, you can help borrowers prevent over-leverage by ensuring that the cost of renovations is at par with anticipated ARV.
Encourage your clients to:
By helping your clients stay on track, you reduce the likelihood of funding shortfalls and increase the chances of a successful project, ensuring repeat business for your lending services.
Real estate trends change, and ARV projections need to be revised based on that. Mortgage brokers and wholesale lending partners who anticipate market changes are in a position to provide more informed guidance to clients about possibilities and pitfalls.
Some key factors affecting ARV calculations include:
By providing market insights, you position yourself as a knowledgeable and trusted partner, helping clients make informed investment decisions.
For third-party originators, focusing on ARV-based lending can bring in new business leads. This is how you can incorporate ARV-specific financing in your business:
Networking with rental property owners, developers, and fix-and-flip investors can create steady deal flow. Most of these investors use private lenders who comprehend ARV-based financing.
To attract more clients, consider:
By positioning yourself as an expert in ARV financing, you can gain more referrals and long-term clients.
Not all lenders base loans on ARV, but lenders who do can offer superior leverage and financing opportunities for your customers. Having relationships with lenders offering ARV-based financing provides you with competitive loan products to fulfill investor requirements.
Look for lenders who provide:
By aligning with lenders that understand ARV, you enhance your ability to serve clients while growing your brokerage business.
In addition to direct lending, lending partners can monetize ARV-based financing through referral and affiliate programs. Most private lenders, such as RCN Capital, provide compensation programs for brokers and referral partners who generate business.
By referring clients to ARV-based loan programs, you can:
Wholesale lending is a relationship-driven industry, and leveraging ARV financing can help you establish yourself as a go-to partner in the real estate investment space.
At RCN Capital, we specialize in ARV-based financing solutions that help real estate investors succeed—and provide mortgage brokers and lending partners with a competitive edge.
Our programs include:
We’re committed to providing industry-leading loan products and competitive compensation for our partners. Connect with us today to discuss our ARV-based financing solutions and how we can help you grow your business.