Best loans for value-add and repositioning

Three things decide a value-add loan

1. How it is sized. Bridge and construction lenders lend against cost and the value the plan creates. Permanent lenders lend against income you already have. A building in transition fits the first group.
2. How you get out. The plan ends with a sale or a permanent refinance. A loan with an open prepayment option or a modest exit fee costs less to leave than one with yield maintenance.
3. How fast the money arrives. A purchase contract or a seller’s deadline makes the approval chain part of the price.

The scorecard weights those three most. Rate is a fifth of the score because it matters, but on a two- or three-year hold the fees, extension terms and exit cost often matter more.

Worked example: buy, renovate, refinance

Illustration. Buy an apartment building for $4,000,000 and spend $800,000 on renovation, $4,800,000 in all. Net operating income is $260,000 at purchase and the plan targets $340,000.

Step (illustration)	Assumption	Result
Bridge loan	75% of total cost, interest only at 7.20%	$3,600,000 loan; $1,200,000 of equity
Interest during the plan	Interest only on the full loan	About $259,200 a year: nearly all of today’s $260,000 NOI, and more than the building earns while renovation empties units
Stabilized value	$340,000 NOI at a 6.50% cap rate	About $5,231,000
Agency takeout	80% LTV and 1.25x coverage at 6.50%, 30-year amortization	LTV allows $4,185,000; coverage allows $3,586,000
Refinance result	Coverage binds	About $14,000 short of the $3,600,000 bridge payoff, before costs

The plan works on value and still comes up short on coverage. Three fixes are on the table before you buy: a smaller bridge loan, an interest reserve funded at closing, or a takeout with more amortization or a lower coverage floor (an FHA 223(f) refinance on these numbers allows more). Run the stack in the LTV and LTC calculator and the interest-only vs amortizing calculator.

Which program fits which plan

Plan	Best fit	Why	Where it loses
Light renovation, stable income	Bank or credit union	Lowest cost, flexible prepayment	Recourse; coverage test on today’s income
Heavy renovation or lease-up	Bridge loan	Sized on cost and the plan, interest only	Floating rate, exit fees, extension risk
Large transitional asset	Debt fund	Larger, non-recourse, flexible structure	Fees and rate cap cost
Need to close in days	Private lender	Decides alone	The highest rate and a full guarantee
Gut rehab of apartments, long hold	FHA 221(d)(4) substantial rehab	87% of cost3, Up to 40 years (or 75% of remaining economic life, if less)	The longest process. Prevailing wages (Davis-Bacon) required on 221(d)(4) new construction and substantial rehab4
Energy, water or resilience work	C-PACE alongside the senior loan	Long fixed term on the improvements	Needs a state program and the mortgage lender’s consent
Equity gap behind the senior loan	Mezzanine or preferred equity	Lifts total leverage	The most expensive capital in the stack

What value-add lenders check

• The budget and who builds it. Line-item costs, contractor bids and a contingency. A heavy rehab with a bank can trigger construction rules; for bank construction loans, the capital you contribute matters: 15% of appraised as-completed value⁵ lets a loan avoid the higher-risk category.
• The rent comps behind the plan. The lender tests your post-renovation rents against nearby renovated units.
• Your track record. Similar projects completed, on budget, with the exit achieved.
• The exit. Which permanent lender takes you out, at what coverage, at today’s rates. Lenders now ask for this up front.
• The market’s appetite. CBRE’s H1 2026 survey: Cap rates compressed more for class B and C and value-add assets than for class A and stabilized assets⁶. That helps value-add exits; a reversal would hurt them.

How the scorecard treats each line

Approvals use the tiers on the fastest-to-close ranking. Exit flexibility scores the easiest prepayment option a program offers, from an open option down to lockout or defeasance. Leverage counts only a published maximum, which is why bridge and bank loans score zero on it: their lenders set leverage deal by deal. Mezzanine and preferred equity close alongside a senior loan, so they score nothing on approvals.

Send Janover Capital the purchase price, budget and business plan. We will match it to the lenders funding that kind of plan now.