LTV
Loan-to-value is debt divided by property value or purchase price. It measures how much of the asset is financed with debt.
Why it matters
LTV changes what a disciplined buyer can pay, how much debt the asset can safely carry, and whether the return is coming from operations or fragile assumptions.
Formula
LTV = loan amount / appraised value or purchase price.Worked example
In underwriting, tag LTV beside the exact source input and rerun the model when that input changes. The point is not a pretty metric; it is a better buy, hold, refinance, or walk decision.
How investors read it
Debt should make a solid deal more efficient, not hide a weak one. If the asset fails unlevered, leverage usually makes the failure arrive faster.
Common mistakes
- · Treating the metric as a verdict instead of a screen.
- · Using broker-package assumptions without checking the source documents.
- · Ignoring taxes, capex, vacancy, financing terms, and timing.
Use current local data and source documents. Realist should show assumptions and date-stamp market inputs because stale inputs create fake precision.