The loan-to-value ratio (LTV) is the ratio of a loan amount to a property's appraised value or purchase price, used by lenders to assess risk and determine maximum available financing. Industrial property LTV maximums typically range from 65% to 75%, meaning a buyer needs to contribute the remaining 25% to 35% as equity, though this varies by lender, property type, and borrower qualifications.
LTV and equity requirement relationship
| LTV | Equity requirement (as % of value) |
|---|---|
| 65% | 35% down payment |
| 70% | 30% down payment |
| 75% | 25% down payment |
What to watch for before committing
Lender-specific LTV maximums
Confirm the specific maximum LTV your target lender offers, since this varies by lender, property type, and market conditions.
Appraised value vs purchase price basis
Understand whether LTV is calculated against appraised value or purchase price, since a difference between the two affects your actual financing outcome.
Interaction with DSCR requirements
Recognize that both LTV and DSCR requirements apply simultaneously — whichever produces a lower loan amount typically governs.
Property type and tenant risk factors
Understand how property-specific risk factors, like single-tenant concentration or building age, might affect the LTV a lender is willing to offer.
Total equity capital planning
Calculate your total required equity capital based on realistic LTV assumptions before committing to a specific acquisition.
Refinancing LTV considerations
For existing properties, understand how current appraised value and LTV requirements affect potential refinancing proceeds.
When you need to know this
- Planning equity capital for an acquisition — calculating required down payment based on realistic LTV assumptions
- Comparing financing options across lenders — understanding how LTV maximums vary and affect your capital needs
- Evaluating refinancing potential — assessing how current property value and LTV limits affect available proceeds
- Structuring an investment with partners — determining total equity capital requirements for a specific acquisition
Frequently asked questions
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