When you invest in the Harvey Capital Income Fund, you're entrusting us with your capital. It’s my responsibility to protect that capital, and our underwriting process is the bedrock of that protection. I want to pull back the curtain and show you exactly how we evaluate every single loan before we deploy a dollar of your money.
Our philosophy is simple: both the asset and the borrower have to be right. We are asset-based lenders, meaning the real estate is our primary collateral — but we put equal emphasis on who we're lending to. A great property with the wrong borrower is still a bad loan. We vet every borrower's experience, track record, and financial capacity before approving a deal, and we only work with professional operators who have a history of executing successfully. Combine a strong borrower with a conservatively valued asset and a properly structured loan, and you have a well-protected investment. To date, we have had zero principal losses — a direct result of this disciplined approach to both sides of the equation.
Step 1: Getting the Value Right (ARV)
We cannot emphasize this enough: an accurate — and ideally conservative — estimate of the After-Repair Value (ARV) is the single most important factor in protecting investor capital. The ARV is what the property will be worth after the borrower completes their planned renovations. If we get this number wrong, nothing else in our analysis matters. The LTV ratio, the borrower's experience, the loan structure — all of it is built on top of the ARV. Get it right, and the deal has a built-in margin of safety from day one. Get it wrong, and you're exposed. There's an old saying in real estate: you make your money when you buy, not when you sell. The same is true in lending — we protect our investors' capital at the point of underwriting, not at the point of payoff.
We use automated valuation models (AVMs) as one of several inputs, but we never rely on them as the final word. AVMs are a starting point — useful for spotting broad trends, but they can’t account for the condition of a specific property, the quality of a renovation plan, or the nuances of a particular street. Our ARV process layers multiple sources: recent comparable sales in the immediate vicinity, adjusted for size, style, and level of finish; AVM data from multiple platforms; our own firsthand knowledge of the local markets we lend in; and, where appropriate, third-party appraisals or broker opinions of value. We cross-reference all of these to arrive at a number we’re confident in — and then we err on the side of caution. If a borrower thinks a property will be worth $500,000 after renovation but our analysis shows $475,000, we use our number. This conservative, multi-source approach to valuation is the first layer of protection for your capital.
Step 2: The Loan-to-Value (LTV) Buffer
Once we have a conservative ARV, the next step is to determine the loan amount. We will not lend more than 70% of the ARV. This creates a significant equity buffer in the property. For example, if we determine the ARV of a property to be $400,000, the maximum we would lend is $280,000. This 30% buffer is your margin of safety.
Why is this so important? If the borrower defaults on the loan, we have to foreclose on the property and sell it to recoup our investment. The 30% equity buffer ensures that even if we have to sell the property at a discount, there is still enough value to cover the loan amount, any legal fees, and holding costs. Our portfolio’s weighted-average After-Repair-Loan-to-Value (ARLTV) is currently 66.52%, which is well below our 70% maximum. This demonstrates our commitment to maintaining a significant margin of safety across our entire loan book. All our loans are senior-secured, meaning we are in the first position to be repaid if the property is sold.
Step 3: Vetting the Borrower
While the asset is our primary security, the borrower is still a critical piece of the puzzle. A good borrower can execute a project efficiently and get our capital back to us quickly. A bad borrower can cause delays, cost overruns, and headaches. That’s why we prioritize working with experienced, well-capitalized house flippers who have a proven track record of success.
We look at a borrower’s experience, financial situation, and their team. We also run a soft credit pull on every borrower — not because we’re underwriting based on credit scores, but because it helps us weed out borrowers with serious financial red flags that could signal problems down the line. Beyond that: have they completed similar projects before? Do they have the cash reserves to handle unexpected issues? Do they have a reliable team of contractors? We want to see a borrower who treats their projects like a business, not a hobby. A professional borrower understands the importance of speed and execution. The faster they can complete the renovation and sell the property, the faster our capital is returned and can be redeployed into the next profitable loan. This focus on borrower quality is why we have been able to originate over $4 million in loans across 25+ projects with a smooth operational track record.
Step 4: Structuring the Loan for Success
The final step is to structure the loan in a way that protects our interests and incentivizes the borrower to perform. Our typical loan terms are designed to do just that. We offer a 9-month term, which is enough time for an experienced flipper to complete a renovation, but not so long that it encourages them to drag their feet. We charge 12% interest and 3% in origination points, which provides a strong return for our investors. We also charge a $700 documentation fee to cover our legal and administrative costs.
We also include provisions for extension fees. If a borrower needs more time to complete a project, they can pay a fee to extend the loan. This not only compensates our investors for the additional time their capital is deployed, but it also incentivizes the borrower to finish the project as quickly as possible. This combination of a relatively short term and the potential for extension fees creates a powerful incentive for borrowers to perform, which ultimately benefits our investors through monthly distributions and the rapid recycling of capital into new loans.
This four-step process—conservative valuation, a significant LTV buffer, thorough borrower vetting, and protective loan structuring—is how we protect your capital and generate the consistent returns this strategy is known for. It’s a disciplined, repeatable process that has delivered strong returns to our investors, all with zero principal losses.