Understanding Loan-to-Value (LTV) and After-Repair Value (ARV): What Every Investor Needs to Know

If you’re serious about real estate investing—whether you’re flipping houses, buying rentals, or using hard money—you’ve likely come across the terms Loan-to-Value (LTV) and After-Repair Value (ARV). These aren’t just finance buzzwords—they're critical tools for evaluating deals, securing funding, and protecting your investment capital.

In this post, we’ll break down what LTV and ARV mean, why they matter, and how to use them to make smarter, more profitable real estate decisions.

What is LTV (Loan-to-Value)?

Loan-to-Value (LTV) is a ratio used by lenders to determine how much they’re willing to lend based on the value of the property—either its current value or its future value after improvements.

LTV Formula:

LTV = (Loan Amount ÷ Property Value) × 100

Example:

• Property value: $200,000

• Loan amount: $140,000

• LTV = (140,000 ÷ 200,000) × 100 = 70%

That means the lender is financing 70% of the property's value, and the remaining 30% must be covered by your down payment, equity, or other sources.

Why LTV Matters to Investors

Lenders use LTV to measure risk. The higher the LTV, the more risk they take on. That’s why most hard money lenders cap their loans around 65–75% LTV—especially for flips or non-owner-occupied investments.

Lower LTV = Lower risk for the lender, and potentially better rates for you.

For investors, knowing the LTV helps you:

• Understand your cash requirements

• Compare loan offers more effectively

• Avoid overleveraging on a deal

What is ARV (After-Repair Value)?

After-Repair Value (ARV) is an estimate of what a property will be worth after renovations are completed. ARV is crucial when you’re flipping a property, doing a BRRRR deal, or seeking funding for a value-add project.

ARV = Projected Sale Price After Renovations

How to Estimate ARV:

• Look at recent comparable sales (comps) within 0.5–1 mile.

• Use homes with similar square footage, bedrooms, bathrooms, and age.

• Adjust for features, upgrades, and location nuances.

  
  

  Tip: Always use conservative comps to stay on the safe side.

  
  

How ARV and LTV Work Together

In fix-and-flip or renovation projects, many lenders use ARV instead of current market value to structure the loan. This is called ARV-based lending, and it’s common with hard money and bridge loans.

Example:

• ARV: $300,000

• Lender offers 70% ARV: $210,000 max loan

• Purchase price: $180,000

• Rehab cost: $25,000

• Total project cost: $205,000→ You’re under the $210K loan limit, so this deal may qualify.

  
  

This approach allows you to fund the purchase and possibly part (or all) of the rehab—giving you more leverage and reducing upfront capital needs.

Why LTV and ARV Are Crucial in Hard Money Lending

At QuickDraw Lending, we look closely at both current value and ARV when structuring deals. We want to know:

• Are you buying the property at a good price? (Equity cushion)

• Are the renovations adding real value?

• Will the loan remain safe relative to ARV?

That’s why having a clear, accurate ARV and knowing your projected LTV are key when applying for funding. It gives lenders confidence and gives you clarity on how much you can borrow—and safely repay.

Key Takeaways for Investors

Know your numbers before you buy – Estimating ARV and calculating LTV helps you evaluate risk and determine your max offer.

Use LTV to protect your capital – Don’t overleverage or rely on overly optimistic projections. Leave margin for the unexpected.

Leverage ARV for value-add deals – If you’re improving a property, make sure your renovation plan translates into real post-repair value.

Work with experienced lenders – Partner with a lender like QuickDraw Lending who understands how to evaluate deals using both current value and ARV.

Conclusion

LTV and ARV are two of the most important metrics you can learn as a real estate investor. They guide smart acquisitions, help you secure funding, and ensure you’re not taking unnecessary risks.

Whether you're doing your first flip or your fiftieth, understanding how these numbers work together gives you a competitive edge.

📞 Need a loan based on ARV or want help analyzing your next deal? Contact QuickDraw Lending—we’re here to fund your success.