Lending against rehabilitated homes in different markets throughout the US reveals profound differences in the way that lenders view the value of the house when completed.

More aggressive lenders seem comfortable to lending upon the appraised value, subject to there being sufficient income from the owner-occupant or from the tenants to carry a mortgage for 65-70% loan-to-value. On the other hand, especially in the Midwest, lenders are reluctant to lend against anything other than acquisition costs and documented rehabilitation costs, referring to the increase in price for the improved building as "appraisal equity." They might lend against 90% of the documented cost of acquisition and rehabilitation, which is, of course, considerably less than the market value.

Why do you think those Midwestern banks are so conservative in their lending practices? What institutional traumas did they experience in the last 20 years which tempers their lending posture? If you were trying to make a living by buying and holding rehabbed houses as rentals, what strategies might you adopt to deal with the local lending practices?