Loan-to-Value (LTV)

The ratio of the loan amount to the appraised value of the property. LTV = Loan Amount / Property Value × 100. A 75% LTV means you're borrowing 75% of the property's value and putting 25% down.

Key Points

Understanding loan-to-value (ltv) is essential for evaluating real estate investments
This concept helps investors compare opportunities objectively
Our Free Snapshot tool automatically calculates relevant metrics for any property

Related Terms

Debt Service Coverage Ratio (DSCR)

A measure of a property's ability to cover its debt obligations. DSCR = NOI / Annual Debt Service. A DSCR of 1.25 means the property generates 25% more income than needed to pay the mortgage. Lenders typically require DSCR of 1.20-1.25 minimum.

Down Payment

The initial equity payment made when purchasing a property, typically expressed as a percentage of the purchase price. Investment properties usually require 20-25% down payment, compared to 3-20% for primary residences.

Leverage

Using borrowed money to increase the potential return on investment. Leverage amplifies both gains and losses. A property bought with 25% down has 4x leverage, meaning a 10% property appreciation creates a 40% return on equity.