Deal structures have changed more in the last eighteen months than in the five years before that. Rates are sticky. Appreciation is flat. Banks are slow. The operators making money right now are not the ones with the highest leverage. They’re the ones with the cleanest structure.
Here’s what we’re seeing across Ohio deal flow, and how the operators who close are setting up their deals.
Leverage is settling lower than it was
In 2022, 85 to 90 percent LTC was standard on a clean fix-and-flip. That number is sliding. Today, most of what’s working is in the 70 to 80 percent LTC range, with the operator bringing real skin to the table. The reason is simple. When ARVs were appreciating, lenders could stretch leverage because the property would bail out a thin deal at exit. With flat ARVs, the lender has to underwrite to the as-is value and the rehab budget, not to a hoped-for exit.
Operators who push for max leverage often end up with a deal that just barely pencils. One missed comp, one rehab overrun, one slow listing, and the spread goes negative. The deals we see closing now have margin built into the structure, not assumed at exit.
Rehab holdbacks are doing more work
The structure we’re funding most often: cover the acquisition at closing, hold back the rehab as a separate reserve, release it in tranches as work gets completed and inspected. The operator funds their own work out of pocket, then gets reimbursed at each draw.
This protects everyone. The lender doesn’t fund work that doesn’t get done. The borrower has discipline on scope because they’re advancing their own money first. The inspector or appraiser gets a chance to flag scope creep or budget overruns before they kill the deal.
If you’re new to construction draws, the math takes some getting used to. Plan for it. Don’t expect to walk away from closing with the full rehab budget in hand.
Interest reserves where they fit
Operators with strong cash flow elsewhere can skip interest reserves. Operators stretching to make a deal work should not. A six-month interest reserve at 11 percent on a $100K loan is about $5,500. It’s a real number. But that $5,500 sitting in the lender’s account means you make payments even if the project runs three months past your expected exit.
We don’t require interest reserves on every deal. We do require them on deals where the operator’s liquidity outside the project is thin. Worth knowing before you submit.
Exit strategy is splitting, not unified
Two years ago, exit usually meant list and sell. Today, the exits we see are split roughly in half between sell and refi. A few operators are even doing both on the same deal: refinance into a DSCR loan, lease for six months, then sell to an out-of-state buyer once the rental performance is documented.
What this means for your deal: don’t write “sell” on the submission and stop there. Tell us the closed sales that support the listing price. Or tell us the rent and the lender on the refi side. The more specific you are on the exit, the more we can shape the loan to match it.
What this adds up to
The operators who are getting deals done in this market are taking less leverage, structuring more discipline, and being specific about how they get out. The ones who are stuck are running plays from 2022 and waiting for the market to bail them out.
If your deal pencils at lower leverage with a real rehab holdback and a specific exit, send it. That’s the kind of deal we’re funding fast right now.