What’s the equity and loan to value?

What’s the equity and loan to value?

The first thing to address is the loan to value (LTV). Equity is key. It is the ultimate protection for investors in the event of default. It makes up for many mistakes and it is what private-money investors look at from the outset to see if a property is worth funding.
Typically, the rule of thumb for maximum LTVs is:
• 70 percent for single-family residences (owner-occupied and non-owner-occupied);
• 65 percent for commercial properties;
• 60 percent for industrial properties; and
• 50 percent for vacant land.

Private investors understand that there are credit challenges, income-documentation difficulties and other situations that can come when placing a loan through institutional sources. If there is a lot of equity in the property, they likely will be interested in extending a loan to the borrower.