TL;DR
- Ross Paller's funding lesson asks you to identify the base before comparing loan percentages. Eighty percent of purchase price is different from eighty percent of purchase plus eligible renovation costs.
- Hold the project constant when comparing proposals. In the illustration below, the same $200,000 purchase and $40,000 rehab leave an $80,000 purchase/rehab gap under one calculation and $48,000 under another.
- An ARV-based headline is still only a calculation until the loan and its conditions are confirmed. An arithmetic excess over purchase and repairs is not personal profit or proof of freely available cash.
- Add the costs and reserves outside the calculation, then reconcile them with approved usable proceeds. Keep total loan size separate from the money available for a particular expense when it is needed.
Ross Paller's funding question: “percent of what?”
Two lenders can quote the same percentage and leave you needing different cash. They may be multiplying different numbers. One percentage might refer to purchase price; another to purchase and eligible renovation costs. An ARV figure refers to an estimated finished value, not the amount you are paying today.
In his funding-course illustration, Ross Paller compares those bases. The useful lesson is the denominator, not a promise that every lender uses the illustrated percentages or approves the resulting amount.
Keep three questions apart: what does the formula calculate, what has the lender approved, and what money can the project actually use? A formula can answer the first without settling the other two.
Compare the same purchase and repair scope
Hypothetical same-project comparison: purchase price is $200,000 and renovation is $40,000. Together they are $240,000 before financing expense, closing, holding, selling costs and reserves. The illustrated finished value is $350,000, not a current market estimate. Percentages are teaching assumptions, not lender offers.
| Illustrated basis | Calculation | Headline amount | Purchase/rehab amount not covered by that arithmetic |
|---|---|---|---|
| 80% of purchase only | $200,000 × 80% | $160,000 | $240,000 − $160,000 = $80,000 |
| 80% of purchase plus rehab | ($200,000 + $40,000) × 80% | $192,000 | $240,000 − $192,000 = $48,000 |
| 70% of illustrated ARV | $350,000 × 70% | $245,000 | Not an established cash requirement or disbursement. The formula alone is insufficient. |
For purchase-only arithmetic, the $80,000 consists of $40,000 toward the purchase and all $40,000 of rehab. For the combined-cost arithmetic, 20% of $240,000 is $48,000. The difference is $32,000, because the second formula includes 80% of the $40,000 rehab: $40,000 × 80% = $32,000.
That comparison holds the house and work constant. An earlier owner-occupied illustration in Ross's course used $30,000 of rehab, while the investment illustration used $40,000. Mixing those projects would make it look as if the down payment alone caused a difference that also included a changed repair budget.
Why the $245,000 headline is not $5,000 of profit
The arithmetic is straightforward: $245,000 minus $240,000 equals $5,000. The interpretation is where people get into trouble.
Neither the illustrated ARV nor multiplying it by 70% establishes the approved amount, other financing limits, permitted uses, deductions or release conditions. The figure does not establish that $245,000 reaches your account or that you can take $5,000 for yourself. It is borrowed-money arithmetic, not earned profit.
Get the actual proposal. Ask which value the lender accepts, whether cost or other caps apply, what is financed, what is withheld or paid elsewhere and what you must contribute. Mark any unanswered item unresolved. Do not fill that gap with a general claim about what “hard money lenders” do.
The ARV guide explains how to support a finished-value estimate. It does not turn that estimate into a lender commitment.
Add what the purchase-and-rehab comparison left out
The $80,000 and $48,000 figures are narrow gaps, not complete project cash budgets. Add the expenses the actual loan will not fund and any reserve you intend to keep available. Check for double counting: if a fee has already reduced the usable proceeds, do not subtract it again without reconciling the entries.
Original fictional cash-bridge exercise: keep the $192,000 combined-cost headline above. Assume, solely for this exercise, that all $192,000 is approved and usable toward the $240,000 purchase/rehab total. Add $6,000 of unfinanced financing and acquisition expenses, $9,000 of unfinanced holding expenses and a separate $10,000 reserve. These amounts are invented, not fee quotes or reserve recommendations.
| Reconciliation | Amount |
|---|---|
| Purchase and rehab | $240,000 |
| Less assumed approved, usable funding for those items | −$192,000 |
| Narrow purchase/rehab gap | $48,000 |
| Additional unfinanced financing/acquisition expenses | $6,000 |
| Additional unfinanced holding expenses | $9,000 |
| Separate cash reserve | $10,000 |
| Cash contribution plus reserve in this limited plan | $73,000 |
The cash plan is $48,000 + $6,000 + $9,000 + $10,000 = $73,000. Only $63,000 is assigned to the listed costs; $10,000 is held as reserve, not assumed spent. The plan excludes selling costs, income taxes and any unlisted expense. It is not a complete profit model or an additional $192,000 expense on top of the project costs. The loan supplies funds and must be repaid; it does not create a second copy of the house and repair costs.
Use the complete flip-cost guide for the broader project decision. Ross's October 2, 2026 cost clarification keeps selling costs outside his 80–85% pre-exit benchmark. Neither that benchmark nor the quick purchase screen answers the borrowing or cash-availability questions here.
Loan size and cash availability are different checks
Even a confirmed total can have conditions on how the project uses it. As a specific example, HUD's 203(k) stages, checked November 3, 2026, describe underwriting and funding separately from repair-stage inspection, draw certification and lender payment.
Those are FHA program steps, not evidence that every private lender releases money the same way. The point here is narrower: do not convert a total commitment into an assumption that every repair dollar is freely available immediately. Confirm the actual terms rather than using the table as a cash-flow calendar.
Turn the comparison into a question you can resolve
For each proposal, record the base, percentage, accepted costs/value, approved amount, permitted uses, deductions and your remaining contribution. Keep supporting documents with the figures. If a term is still indicative, say so.
Choose a financing path using the actual conditions and the project you can afford, not whichever headline looks biggest. The useful number is the amount of real cash your plan requires, with its limitations visible.
If you are choosing an area before pursuing properties, begin with your first neighborhood analysis free. Mailing is paid. Neighborhood information does not replace property underwriting or a lender's approval.
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