LTV and ARV: What Lenders Mean and Why It Matters

15 September 2026 · SFR Capital

Two acronyms decide how much money arrives at closing, and investors regularly assume the more generous reading of both.

LTV — loan to value

The loan divided by the property's value. The question is which value. Some lenders lend against the as-is value today; others against the after-repair value. The same "70% LTV" means very different cheques.

ARV — after repair value

What the property is worth once the planned work is finished. It is an estimate about a future condition, which is why lenders discount it and why an optimistic ARV is the most common reason a deal is sized lower than the investor expected.

Why it matters to your cash

On a $400,000 purchase needing $80,000 of work, with a $600,000 ARV:

• 70% of as-is $400,000 = $280,000 — you fund $120,000 plus the rehab.
• 70% of ARV $600,000 = $420,000 — a different deal entirely.

How SFR sizes it

Maximum 75% of SFR's own value conclusion, reached in-house using multiple automated valuation models reconciled against public-record comparable sales. Loan amounts run $100,000 to $3,500,000. Because the valuation is ours rather than an outside appraiser's, the number comes back in a day rather than a week — and it is the number we lend against, not a starting point for negotiation.

The question to ask

Ask any lender: "Is that percentage against as-is or after-repair value, and who determines it?" The second half matters as much as the first.

Why lenders discount ARV

After-repair value is a forecast, and three things can move it: the work is not completed to the standard assumed, the market shifts during the hold, or the comparable sales used were optimistic. A lender lending 70% of a number that turns out to be 15% high is lending 82% of the real number — which is why the ARV is scrutinised harder than the as-is value ever is.

How a value conclusion is reached without an appraiser

Multiple automated valuation models are run and reconciled against public-record comparable sales in the immediate market. Where the models agree and comparables are plentiful, the conclusion is tight and arrives in hours. Where they disagree — an unusual property, a thin market, a recent sale that looks like an outlier — the conclusion is conservative, because a model that cannot see the property will not assume the best case.

Working out your actual cash requirement

A $400,000 purchase, $80,000 of work, a defensible $600,000 ARV, at 70% of as-is value:

• Loan: $280,000
• Down payment: $120,000
• Rehab, funded by you and drawn back: $80,000
• Closing costs, roughly 2–3%: ~$10,000
• Six months of interest at 12%: ~$16,800
• Cash in: roughly $190,000 at peak, before any draw comes back

Investors who plan only for the down payment are surprised by the other $70,000, and the timing matters as much as the total — rehab money is spent before it is reimbursed.

What raises your LTV

Nothing about you. LTV is a property-level ratio, so improving it means improving the deal: buying better, or reducing the loan. If a lender sizes lower than you hoped, the productive question is "what value did you conclude, and against which comparables?" rather than a request to stretch the percentage.

When the numbers disagree with you

If your ARV and the lender's differ materially, one of you has better information. Sometimes it is you — a renovation standard the comparables do not reflect, or a pending sale not yet recorded. Say so, specifically, with addresses. A value conclusion is a conclusion from evidence, and new evidence is worth presenting. What does not work is an assertion without one.

Two ratios, two different jobs

LTC — loan-to-cost — is the third number in the room and the one that most often binds. Cost is purchase price plus documented rehab. A lender may offer seventy-five per cent of ARV and ninety per cent of cost and fund the lower of the two, which means a property bought below market can be constrained by what you paid rather than what it is worth. That is not the lender being unreasonable; it is the lender declining to fund your equity out at closing on a property you bought yesterday.

A worked example

Purchase $260,000. Rehab $70,000. Total cost $330,000. ARV, supported by comparables, $450,000.

• 70% of ARV = $315,000
• 90% of cost = $297,000
• Loan sized at the lower: $297,000, of which $70,000 is held back for rehab

So $227,000 funds at closing against a $260,000 purchase, and you bring $33,000 plus closing costs. Then you carry each rehab stage until it is verified. Knowing that shape in advance is the difference between a smooth closing and a scramble in week one.

Why the seasoning question comes up

If you bought the property recently and are asking a lender to size against a much higher value, expect the purchase price to anchor the conversation unless something explains the gap — an off-market purchase, a distressed seller, work already completed and documented. Explaining it upfront is far more effective than letting the title search raise it.

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SFR Capital LLC (SFR) is a private lender, license exempt under Fla. Stat. § 494.00115. SFR only makes business purpose mortgage loans on non-owner occupied Florida investment property. Nothing here is an offer or commitment to lend. All loans are subject to SFR approval of the sponsor, property collateral, title and documentation.