Loan-to-Cost Ratio (LTC)
A ratio used in commercial real estate construction to compare the amount of the loan used to finance a project to the cost to build the project. If the project costs $1 million to complete and the borrower borrows $700,000, the loan-to-cost (LTC) ratio would be 70%. The costs included in the $1 million cost figure would be land, construction materials, construction labor, professional fees, and permits.
To create an EquityMultiple account and view current and past CRE debt investments, please follow this link.
For more on the use of debt and leverage in commercial real estate investing, please review this article from our Learning Series.
Back to Glossary