Understanding how lenders evaluate risk is a critical skill for real estate investors and developers.
Whether you are analyzing a potential fix-and-flip project, new construction, or a residential rehab project, the numbers behind the deal shape pricing, leverage, and ultimately profitability.
Two of the most important metrics in private lending are Loan-to-Value (LTV) and After-Repair Value (ARV). Used correctly, these measures help borrowers assess risk, protect capital, and avoid deals that look attractive on paper but fail under real-world conditions.
This post breaks down how LTV and ARV work, how lenders like us use them, and how investors can apply them to decide when a project makes sense and when discipline is the better move.
Loan-to-After-Repair Value (LTARV)
At Cetan Funds, when we refer to LTV, we’re generally talking about after-repair value. Many of the loans we provide are rehab fix and flip loans, which are primarily focused on how much the property will be worth after the renovations are completed.
Because of the scope of these projects, when we discuss a loan with our borrowers at a certain percentage of LTV, we are looking at it from an after-repair or as-complete perspective rather than as-is or current value.
This difference in how we view LTV matters. It helps us to better understand the type of project we may be funding, as well as provide clarity to our borrowers and clear up any misconceptions that we can only lend a percentage of the as-is value.
By focusing on LTARV, we’re able to structure loans that help our borrowers and investors build wealth through real estate.
Understanding the types of LTV is important to understanding how we structure our loans and view project potential.
Types of LTV
After-Repair or As-Complete
Understanding ARV is an important part of understanding LTV and how we lend.
After-Repair Value or As-Complete is the estimated market value of a property after renovations or improvements are complete.
ARV is a core input in evaluating potential profit and determining how much a private lender is willing to finance. For value-add projects, especially fix-and-flip rehabs, lenders like us focus heavily on the property’s projected market value once the work is finished.
For example, if an investor purchases a fixer for $150,000 and plans $50,000 in renovations, with a projected ARV of $250,000, a private lender like Cetan Funds may structure a loan up to 70–75% of ARV, or approximately $175,000, to help fund the purchase and the rehab.
Accurately estimating ARV requires disciplined analysis based on truly comparable sales. Location, age, renovation scope, property size, condition, buyer demand, and construction quality all play a role in determining realistic after-repair value.
Overly optimistic assumptions can quickly undermine a project’s economics.
As-Is or Current Value
In traditional lending, LTV is typically calculated using the property’s current or as-is value.
In private lending, loans are often structured to fund a property’s purchase or refinance along with its improvements, making Loan-to-After-Repair Value the more relevant measure. This metric compares the total loan amount to the property’s projected value after renovations are complete.
While Loan-to-After Repair Value (LTARV) is typically what we look at, the property’s as-is or current value is still an important aspect to consider in the overall analysis.
The as-is value is what a fix and flip property is currently worth – before any renovations, and helps to establish a baseline risk.
In use, this means that borrowers should have thoughtful equity in the deal to start. This helps ensure that the project is being acquired at a reasonable price and that the renovation budget is realistic relative to the current value.
Experienced developers recognize that preserving margin is just as important as maximizing leverage.
Real estate projects rarely unfold exactly as planned, and equity provides critical flexibility when timelines shift, costs rise, or markets soften. Lower LTV reduces risk for both the borrower and the lender and often results in stronger loan terms and greater project resilience.
Dangers of Overestimating ARV
A realistic ARV is grounded in current market data, not optimism.
Overestimating future value can quickly turn a dream project into a nightmare. Inflated ARV assumptions create unrealistic profit expectations and higher risk.
For example, an investor might calculate an ARV of $300,000 based on newer homes in a different neighborhood, but in reality, similar sales in the property’s actual area support an ARV closer to $250,000. That $50,000 gap can erode expected profits and increase project risk, especially if the market slows or construction costs rise.
Realistic ARVs can keep projects profitable, especially in stagnant or cooling markets.
How Private Lenders Use LTV and ARV in Practice
Private lenders use LTV and ARV as guardrails, not targets.
ARV sets an upper boundary on leverage, while additional constraints on total project cost and borrower equity help ensure the renovation plan is executable.
This framework allows investors to borrow against future value without relying on optimistic assumptions, keeping risk controlled as projects move from acquisition through completion.
Common Misconceptions
A common mistake among newer investors is assuming that higher leverage automatically leads to higher returns. In practice, increased borrowing reduces margin for error and amplifies risk as a project progresses.
When the financial cushion is thin, issues such as construction delays, permitting challenges, cost overruns, or market shifts can quickly erode profits or eliminate them entirely. Maintaining a reasonable Loan-to-Value provides flexibility and resilience when projects do not unfold exactly as planned.
It is also important to recognize that higher renovation spend does not always translate to higher value.
Improvements that align with neighborhood standards and buyer demand tend to produce the strongest returns. Overspending on features buyers do not prioritize can compress margins and make it difficult to recover costs.
Investors who scope renovations carefully are more likely to stay on schedule, protect capital, and achieve consistent outcomes.
Why Work with a Private Lender?
Private lending is not just about speed or access to capital. It is about clarity, alignment, and disciplined execution. When lenders and borrowers are aligned on value, risk, and exit strategy, projects tend to move more efficiently from acquisition through completion.
In markets across Oregon and Southwest Washington, conditions continue to evolve.
Working with a private lender who understands local dynamics and underwriting realities can make a meaningful difference. At Cetan Funds, each project is evaluated on its own merits, with an emphasis on realistic assumptions, clear communication, and practical loan structures.
If you are seeking real estate financing that offers fast approvals, expertise, and flexible terms, Cetan Funds is ready to help. Our team works closely with borrowers to structure lending options that align with project scope, risk, and exit strategy.
With in-house underwriting and funding often completed within a week, Cetan Funds helps investors act quickly while maintaining responsible leverage. We combine local market knowledge with real-world lending experience to support successful outcomes for builders, developers, and real estate investors across Oregon and Southwest Washington.
If you are ready to move forward, get in touch with us.
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BORROWER FAQs
What is a Private or Hard Money Loan?
Private and hard money loans come in many variations, but most are short-term loans provided by an investor or group of investors when conventional financing is unattainable or undesirable.
Most private lenders and hard money lenders, like Cetan Funds, finance projects like fix and flip rehabs, rental properties, commercial bridge loans, land development, and many other unusual or unconventional properties and projects. A private or hard money loan can help real estate investors, developers, builders, and small businesses grow their portfolios and businesses faster than they could on their own.
Here at Cetan Funds, we empower people to build wealth through real estate.
Why choose hard money vs. bank loans?
Hard money (or private) loans are built for speed and flexibility. Banks often require months of paperwork, strict borrower qualifications, and rigid underwriting standards. At Cetan Funds, we base our lending decisions primarily on the value and potential of the property, not just the borrower’s financial profile. This means we can finance properties and projects banks typically decline due to condition, complexity, or unusual circumstances.
Hard money loans are ideal for time-sensitive opportunities like fix-and-flip projects, new construction, or land development.
Where Does the Money You Lend Come From?
Cetan Funds offers two pooled private equity fund investments for Oregon residents who qualify and accredited investors. Our two funds, called Cetan Income Fund and Cetan Opportunity Fund, serve as the primary source of capital for the loans that Cetan Funds originates.
Rather than matching individual investors to individual loans, or borrowing capital from banks or Wall Street as many hard money lenders do, at Cetan Funds, we manage our own pool of funds. The investors own shares of their fund limited liability company and the principals of Cetan Funds manage the portfolio of loans owned by the fund. All loans are serviced by Cetan Funds. To learn more about the advantages of this structure, please contact us.
What Types of Loans Does Cetan Funds Finance?
We can lend on most commercial and residential property in Oregon and SW Washington if the loan is for business or investment purposes. We provide short-term financing for bare land, land development, new construction, rehabs, and residential and commercial bridge loans.
Do You Lend on Primary or Secondary Residences?
No. We can only lend for business or investment purposes and do not lend on owner-occupied residential properties. Check out our blog to learn more about what we do and what we don’t do.
Where Do You Lend?
We lend exclusively in Oregon and SW Washington because we know the market well and are committed to helping grow our local market. We lend primarily in Western, Southern and Central Oregon with an occasional loan in Southwestern Washington.
Do You Only Look at the Property/Collateral?
While we are primarily a “collateral-based lender,” we do not solely look at the property/collateral. In our experience, who you lend to is just as important as what you lend on.
We strive to build long-term relationships with our borrowers, and we cannot achieve that if we focus solely on their real estate. So, we also take into consideration character, capacity, capital, and other conditions.
Weighing these important factors, which are often overlooked by other private and hard money lenders, helps us accurately measure risks for both our borrowers and our investors while allowing us to offer better all-around results for our clients.
Do You Have Minimum or Maximum Loan Sizes?
How Long Are Your Loans?
We offer loans as short as 3 months and as long as 60 months; however, most of our loans are for 6 to 12 months. Plus, we build in automatic extensions to every loan to ensure borrowers have time to deal with unexpected events and circumstances.
What Are Your Application and Underwriting Requirements?
Cetan Funds loans are customized to fit each specific scenario. Therefore, application and underwriting requirements can often vary depending on the situation. Typically, we require the following:
For Applications:
- Cetan Funds Business Loan Application (online form, link provided by your loan officer)
- Personal financial statements for all loan guarantors (form provided)
- Property/project description
- Summary of construction or investment experience (if applicable)
For Underwriting:
- 2 years of tax returns for all loan guarantors
- 3-6 months of bank statements
- Project/property-specific documentation (such as purchase/sale agreements, lease agreements, business financials, etc.)
- Detailed rehab or construction plans and budgets (if applicable)
Please contact us for more information on the application and underwriting requirements for your specific scenario.
How Fast Can I Get a Loan Decision?
How fast is funding?
We pride ourselves on moving quickly. Loan decisions are typically made within 1–2 business days, and pre-approval can often be issued just as fast. Once approved, we can close and fund in as little as 3–5 business days, depending on the project and documentation. That speed lets you secure capital and act on opportunities without the delays common with traditional lenders.
Can I Get Pre-Approved?
How Fast Can You Fund and Close a Loan?
As quickly as 3-5 days.
What is Your Minimum Down Payment?
What Are Your Interest Rates?
Rates vary depending on the project. Typically, annual interest rates are 10-12%. Interest is only charged on the outstanding balance. Therefore, interest is not charged on construction or rehab funds until they are drawn. So, for most of our short-term construction and rehab loans, borrowers actually incur far less than 10-12% in interest expense. For more information, please contact us.
What Are Your Loan Fees?
Origination fees vary depending on the project. Typically, origination fees are 2-4% of the loan amount. We also charge a $995-$1,495 administrative fee at closing.
Can I Live in the Property While I Have This Loan?
Unfortunately, no. Our borrowers cannot live in the residential properties we finance for them.
The only exception is in very specific commercial loan scenarios. If you wish to get a loan on a property you would like to live in now, or in the future, please contact us so we can help you find a lender for that. We are happy to help.
Can I Pay Off My Loan Early?
Do You Fund Rehab and Construction Loans?
On Rehab or Construction Loans, Do You Charge Interest on the Full Loan Commitment?
No. Interest is only charged on the outstanding balance.
How Do Construction Draws Work With Your Loans?
Construction draws are typically disbursed for work completed, materials purchased, or subcontractor invoices ready to be paid. Borrowers work directly with their loan officer, their main point of contact from start to finish on the project, to submit draw requests up to twice per month.
We do not charge fees for construction draws. Draw requests include a breakdown of the items awaiting reimbursement or payment, evidence showing the completed work or materials on site, and copies of subcontractor invoices or receipts over $2,500-5,000. Draws are typically processed in 24-48 hours.
Do You Fund Loans on Bare Land?
Yes, we provide bare land loans. Each situation is different. Please contact us for details.
Do You Finance Mobile or Manufactured Homes?
What is “Cetan”?
Cetan comes from the Lakota language and means “hawk spirit.” We chose it to represent the values we bring to lending: vision to see opportunities, loyalty in building long-term relationships, and speed in delivering funding when it’s needed most.
Supporting local organizations like the Cascades Raptor Center also helps us honor that connection to hawks and our beautiful raptors in the Pacific Northwest while giving back to the community.