Understanding LTV and ARV
Two three-letter acronyms that decide what your loan looks like.
Loan-to-value (LTV) and after-repair value (ARV) are the two numbers that determine how much AVCG will lend on a deal. Get comfortable with them and you'll understand every term sheet you ever see.
LTV — loan-to-value
LTV is the loan amount divided by the property's value. A 65% LTV means the loan is 65% of the value; the remaining 35% is the equity cushion.
ARV — after-repair value
ARV is what the property will be worth once the rehab is complete. For a rehab loan, that's what we size the loan against — because that's the collateral you'll have when the loan matures.
A worked example
Fix & flip
$180K acquisition · $60K rehab · $340K ARV
- Purchase price
- $180,000
- Rehab budget
- $60,000
- Projected ARV
- $340,000
- Max LTV
- 65% of ARV
- Max loan (0.65 × 340,000)
- $221,000
In this scenario, the loan doesn't fully cover purchase + rehab — the operator needs to bring roughly $19K to close. That gap is expected and healthy: it means the operator has skin in the game.
Why the 35% buffer matters
If the ARV comes in lower, if the market softens, or if the project takes longer than planned, the equity cushion is what protects the loan. It's also what protects investor capital — see the companion guide on first-lien security.
Related guides
Keep reading
How first-lien security protects your capital
What 'first lien' means, why it matters, and what happens in a worst-case scenario.
What is a private real estate loan?
Why private lending exists, who uses it, and how it differs from a bank mortgage — in plain language.
Have more questions?
Talk to a specialist — we'll walk through anything the guide didn't cover.