If you’re a real estate investor using a private lender or hard money lender, you’ve likely heard the terms LTC, LTV, ARV, and equity.
But understanding how these numbers work together is critical to getting approved — and scaling efficiently.
At Low Tide Private Lending, we evaluate deals differently than traditional banks. We focus on the asset, leverage, and execution — not just personal income.
Here’s what private lenders actually look at.
What Is Loan-to-Cost (LTC)?
Loan-to-Cost (LTC) measures how much of the total project cost is financed.
Formula:
Loan Amount ÷ Total Project Cost
Total cost usually includes:
- Purchase price
- Renovation budget
Example:
- Purchase: $200,000
- Rehab: $50,000
- Total cost: $250,000
- Loan: $250,000
That equals 100% LTC.
How Private Lenders Use LTC
We typically lend 90–100% of total project cost, depending on:
- Deal strength
- Investor experience
- Market conditions
Higher LTC allows investors to preserve capital and take on more projects — but LTC alone doesn’t determine risk.
That’s where LTV matters.
What Is Loan-to-Value (LTV)?
Loan-to-Value (LTV) measures the loan amount compared to the property’s value — typically the After-Repair Value (ARV) on renovation projects.
Formula:
Loan Amount ÷ After-Repair Value
Example:
- ARV: $325,000
- Loan: $250,000
LTV = 77%
How Private Lenders Use LTV
We typically lend at 65–75% of ARV, depending on:
- Borrower experience
- Exit strategy
- Property type
- Market stability
This is the key distinction:
Even when we finance up to 100% of cost, we remain conservative against value.
That equity cushion is what protects the deal.
Why Equity Matters in Private Lending
Equity = Property Value – Loan Amount
Using the example:
- ARV: $325,000
- Loan: $250,000
- Projected equity: $75,000
That equity provides:
- Refinance flexibility
- Profit margin on resale
- Protection if the market softens
- Time cushion if the exit takes longer
Strong equity reduces risk — for both the investor and the lender.
What Private Lenders Actually Prioritize
Unlike conventional lenders, private lenders focus on:
1. The Deal
- Is the purchase price right?
- Are comps realistic?
- Does the renovation scope support the ARV?
2. Leverage Structure
We evaluate both LTC and LTV — not just one.
3. Investor Experience
Experienced operators may qualify for higher leverage because execution risk is lower.
4. Clear Exit Strategy
Flip, refinance, or hold — the plan must be realistic and supported by numbers.
The Bottom Line: Smart Leverage Wins
Understanding LTC vs. LTV helps you:
- Structure stronger offers
- Preserve cash
- Scale your real estate portfolio
- Reduce downside risk
Private lending isn’t about maxing leverage blindly. It’s about balancing high LTC with disciplined LTV and strong equity.
At Low Tide Private Lending, we structure loans to help investors grow — while maintaining responsible leverage that protects the long-term success of every deal.