Getting into real estate investing can feel like learning a new language. Between acronyms, underwriting jargon, and construction slang, it’s easy for a first-time investor to feel out of their depth before they even make an offer.
But here’s the truth: You don’t need to be an expert—you just need to sound like one when it counts.
Understanding a few key terms can immediately boost your confidence, credibility, and deal-making skills. Whether you’re applying for your first fix-and-flip loan or negotiating with a contractor, these 10 essential concepts are your foundation.
1. ARV (After Repair Value)
Definition: The estimated value of a property after all renovations are complete.
Example: If you purchase a distressed home for $180,000, spend $40,000 on renovations, and similar renovated homes sell for $300,000, the ARV is $300,000.
Why it matters: Private lenders like Malve Capital use ARV to determine how much they’re willing to lend. The higher the ARV relative to your purchase and rehab cost, the better your deal looks on paper and the more leverage you have in financing.
Further reading: ATTOM’s housing data can help you analyze trends and comps.
2. LTV (Loan-to-Value)
Definition: The ratio of a loan amount to the property’s current as is appraised value or purchase price.
Example: If you buy a property for $200,000 and borrow $160,000, your LTV is 80%.
Why it matters: Most lenders have LTV limits to reduce risk. Understanding this metric helps you know how much cash you’ll need to bring to closing to structure offers and get the best financing terms.
3. LTC (Loan-to-Cost)
Definition: The ratio of the loan amount to total project cost (purchase + rehab budget).
Example: If a project costs $250,000 total ($200,000 purchase + $50,000 rehab) and the lender provides $175,000, the LTC is 70%.
Why it matters: For fix-and-flip loans, lenders often base their decision on LTC. This determines how much of the total project they’re willing to finance versus how much you, the borrower, must contribute.
Helpful guide: BiggerPockets breaks down the LTV vs LTC difference well.
4. Scope of Work (Renovation Budget)
Definition: A Scope of Work (often called a renovation budget) is a detailed list of all work required to complete a project, typically broken down by trade and individual work item (e.g., demolition, framing, plumbing, electrical, finishes). It usually includes projected costs and may also include estimated timelines or sequencing.
Example:
A renovation budget may look like this:
- Demolition – $10,000
- Framing – $18,000
- Plumbing & Electrical – $22,000
- Roofing – $12,000
- Interior Finishes – $28,000
Total renovation budget: $90,000
Why it matters: Lenders rely on the scope of work to evaluate risk, determine construction holdbacks, and structure draw releases. If you’re using a construction loan, your contractor gets paid in stages based on progress. Mismanaging this can delay your project.
5. Comps (Comparable Sales)
Definition: Recently sold properties with similar characteristics(size, condition, location, features, and etc) to the subject property, used to estimate value.
Example: If three renovated homes within half a mile sold for $290K–$310K in the last 90 days, those sales form the comps supporting your ARV.
Why it matters: Comps help determine both your offer price and ARV. Investors use sites like Zillow and Redfin to run their own analysis.
6. Hard Money Loan
Definition: A short-term, asset-backed loan typically offered by private lenders.
Example: An investor uses a 12-month hard money loan to buy and renovate a fixer-upper, then sells the property before the loan matures.
Why it matters: These loans are fast, flexible, and ideal for investors who can’t (or don’t want to) use banks. Making them ideal for competitive acquisitions and value-add projects.
7. Title Search
Definition: A review of public records to confirm ownership and identify liens, judgments, or legal issues tied to a property.
Example: A title search may reveal unpaid property taxes or a second mortgage that must be resolved before closing.
Why it matters: Unresolved title issues can prevent funding or delay closings. Every professional lender requires a clean, insurable title before releasing funds.
8. DSCR (Debt-Service Coverage Ratio)
Definition: A ratio used to measure cash flow relative to debt payments, mostly used in rental property underwriting.
Example: If a rental produces $3,000 per month in rent and the mortgage payment is $2,000, the DSCR is 1.50x.
Why it matters: While not critical for flips, it’s key if you plan to refinance into a rental loan. Even investors with limited income documentation can qualify if the property cash flows adequately.
9. Seasoning
Definition: The period of time an investor must hold a property before refinancing or selling.
Example: A lender may require six months of ownership before allowing a cash-out refinance based on ARV.
Why it matters: Seasoning rules affect timing, returns, and exit options. Ignoring them can derail refinance or BRRRR strategies.
10. Exit Strategy
Definition: Your plan for how you’ll repay the loan—through sale, refinance, or long-term hold.
Example: An investor plans to renovate and sell within six months, or alternatively refinance into a DSCR loan if market conditions soften.
Why it matters: Lenders underwrite the exit as much as the deal itself. A clear, realistic exit strategy increases approval odds and reduces surprises.
Why These Terms Matter More Than You Think
Understanding these terms isn’t just about sounding smart—it’s about de-risking your deals.
Lenders, contractors, agents, and partners will all evaluate you based on how clearly you communicate. If you can walk through a project budget using ARV, LTV, and comps, you instantly signal that you’ve done your homework.
Private lenders like Malve Capital don’t just fund deals—they partner with first-time investors to help them succeed. That partnership starts with speaking the same language.
Final Thoughts: Know the Terms, Win the Deal
The real estate game doesn’t reward perfection—it rewards preparation. Mastering these ten terms is a small investment that can yield serious returns on your next project.
Still have questions about how private lending works? Speak with a Financing Advisor and get pre-approved in under 5 minutes. Knowledge is power—but speed is leverage.