LOAN TO VALUE vs. LOAN TO COST
When a sponsor goes out and buys a piece of real estate they will be financing it with two key components of capital.
One is going to be debt that they're going to get from the bank and the other is going to be equity that they're going to be asking you for.
Debt, when it is placed on the property, is never these days going to be 100% of what the sponsor needs. If it were, then they wouldn't need your equity, and one of the ways that banks determine how much they're going to lend to a sponsor is by using one of two ratios, loan to cost or loan to value.
Watch this episode to discover what is the difference and how banks use them, and be sure to go to follow the link below where you can download a list of the top 10 things that you need to know when looking at real estate investment contracts.
For more information and to gain access to:
- Guided tour of 8 real estate crowdfunding websites
- FREE: Complete list of every real estate syndication website
- FREE: 10 things to look for in real estate contracts
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