Investor Loan Glossary

After Repaired Value (ARV)

This is an important part of the process when analyzing a rehab project. The Investor prepares a Scope of Work and Budget which is used to determine the level of value the Investor will create after the work has been done.  ARV is a future LTV.

Debt Service Coverage Ratio (DSCR)

This is a ratio used to analyze the cash flow on an investment property. The formula is: Total Rental Income ÷ PITIA (Principal, Interest, Taxes, Insurance, Association Dues).  When the number is above 1.0 – this represents a positive cash flow. 

Loan to Value (LTV)

This is a ratio used to measure the percentage of debt borrowed versus the Fair Market Value of a property.  The formula is: Loan Amount ÷ Fair Market Value.

Loan to Cost (LTC)
LTC= Loan Amount divided by Purchase Price plus Construction Costs. Loan-to-cost (LTC) compares the financing amount of a commercial real estate project to its cost. LTC is calculated as the loan amount divided by the construction cost. The LTC ratio allows commercial real estate lenders to determine the risk of offering a construction loan. It also allows developers to understand the amount of equity they retain during a construction project.
Residential Transition Loans (RTL)

These are short term loans.  The typical term is 12 months.  All Bridge, Fix N Flip, and Rehab Loans are in the RTL category.

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