What Is LTC (Loan-to-Cost) in Real Estate Investing?

Unlike LTV (Loan-to-Value)—which compares the loan amount to the property’s value—LTC focuses on what an investor is putting into a deal. This distinction is especially important for renovation-based strategies.

Loan-to-Cost is typically calculated as:

Because LTC reflects total project cost, it is most commonly used in financing structures that involve rehabbing, repositioning, or developing properties.

One of the foundational principles of real estate investing is forced appreciation—the idea that the property’s value after improvements exceeds the total costs invested. Strategies such as fix-and-flip and BRRRR rely heavily on this concept.

For these strategies to work effectively, the after-repair value (ARV) of the property should exceed total project costs. In other words, the goal is often to have a higher LTV than LTC, reflecting value creation through renovation.

LTC helps lenders and investors assess:

• How much capital is being deployed into the project
• Risk relative to total investment cost
• Whether the renovation budget and scope are realistic

While LTV focuses on the property’s value, LTC focuses on the project’s cost. Both metrics are important—but LTC is particularly critical for short-term loans, rehab financing, and construction-focused lending.

Understanding the difference between these ratios allows investors to structure deals more effectively and choose financing that aligns with their strategy.

At Lend Investors Capital, we evaluate both LTC and LTV as part of our business-purpose lending approach—helping investors structure projects that support forced appreciation and long-term portfolio growth. If you’re evaluating a renovation or value-add project, our team can help you assess how LTC fits into your financing plan.