LTV vs LTC in Multifamily Bridge Financing
LTV and LTC are two financing measurements that can look similar but answer different questions. LTV compares a loan with the property's value, while LTC compares the loan with the total cost of the project. Knowing the difference is particularly important when evaluating multifamily bridge financing for an acquisition that includes renovation or repositioning. Loan-to-value uses the property's value as the denominator. If a property is valued at $2 million and the loan is $1.4 million, the LTV is 70%. Loan-to-cost works differently. It considers the total project cost, which can include the purchase price and planned renovation expenses. If an apartment property costs $1.5 million to purchase and requires $500,000 of renovations, total project cost is $2 million. For investors considering multifamily real estate loans , the distinction matters because the property's value and project cost may not be the same. A building could have a $1.5 million purchase price but requi...