For quick calculations it is standard to enter 85% of Purchase Price.
Top LTV Tips
- LTV can be calculated on PP or ARV, and can include rehab.
- Hard Money Lender’s risks, already high, can balloon significantly. Shop around and make sure you know your options.
Loan To Value
This is the amount the hard money is able to lend, as a ratio of the amount divided by the value of a property. This is known as Loan To Value (LTV). Typical is 65-75%.
Some lenders base loans on ARV. This creates a riskier loan for the hard money lender but can significantly reduce the borrowers need for capital to invest. In some cases lenders will even include Rehab costs. Expect interest rates to go up, typical is 15-18% and 5-6 points, especially if there is little down payment required from the borrower.
For many real estate investors the options for funding are limited, and risks, just like potential profits, can be substantial. But real estate is lucrative and if a deal is really good there is usually money to be found. Realize that with Hard Money you assume the risk. If you are less experienced, creative funding might be a better route. After all, that’s the route professionals take as well. Be careful what you sign, know your options, and don’t let a good sales person talk you into something you cannot afford.
Need more information? Everything can be obtained by searching online. This site is not specific to a particular way of flipping, it is common “industry” standards and practices only. But you are welcome to contact us – we are a members-only flipping and funding company.
Keystone Funding Network