Private lenders base their loans on the after-repair value of your property. In other words, unlike conventional lender’s value that is here and now, the value that a private lender uses is an aspiration and a vision. It depends entirely on borrowers' ability to execute that vision. If things go according to that plan, you will soon have a beautifully renovated property on your hands. If things really go south, a lender might find itself with a dilapidated home and a loan that greatly exceeds its value.This is exactly why private lenders prefer to set money intended for the renovation in a construction escrow account. It gives them a mechanism to ensure that the renovation process is indeed taking place and the value of the property is, in fact, increasing. Read more here.