LTV vs. LTC

Why This Distinction is Everything for Your Project’s Funding

If you’re a real estate investor or builder exploring real estate investor loans, you know we lenders love our acronyms. But two of the most important ones are LTV and LTC. Confusing them can derail your funding, especially when dealing with real estate investor loans. Let’s break it down:

• LTV (Loan-to-Value): This is based on the after-repair value (ARV) or completed value of the property.
  • Formula: Loan Amount / Property’s Appraised Value
  • Why it matters: It measures our risk at the end of your project, an important consideration for real estate investor loans.
• LTC (Loan-to-Cost): This is based on the total project cost (purchase + rehab/build).
  • Formula: Loan Amount / Total Project Cost
  • Why it matters: It ensures you have enough capital to actually finish the work, which is critical for those utilizing real estate investor loans.

The Sime Ventures Perspective: We focus heavily on LTC because we’re not just lending on what the property is, but on what you’re going to make it. A strong LTC shows you have skin in the game and a viable budget.

Pro Tip: When you approach a lender for real estate investor loans, come prepared with both your ARV (for LTV) and your detailed project budget (for LTC).

Question for you: When analyzing a deal, which number do you look at first—the potential profit (ARV) or the total cost?

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