Posted by David Alexander on December 17, 1998 at 09:56:53:
On SFR’s the max LTV is 80-85%. This applies to brokering notes because that is the limit that most of the Institutional buyers will go. Some will go a little more depending on credit of payor. But, on the other hand I agree with everyone else on this sight
Notes are made and bought to keep not just brokered for the short term profit.
David Alexander
LTV Ratios - Posted by Reg(TX)
Posted by Reg(TX) on December 17, 1998 at 09:47:46:
I read somewhere (I do not remember where) That most experienced investors can look at the paper work on a note submitted and tell whether or not it is a good deal. My limited knowledge assumption is that anyone can quickly estimate a properties LTV and make a call on whether to persue the note. a few questions, am I in the ballpark with my assumption? And what is the ideal LTV ratio for a particular class of real estate, i.e. single family residence, a business, raw land etc. I realize that depending on individual risk tolerence these numbers can be different for different people. If your tolerence if different from the ideal, why?
Reg
Re: LTV Ratios - Posted by Stacy (AZ)
Posted by Stacy (AZ) on December 17, 1998 at 12:08:05:
For brokered notes, here are some generally accepted guidelines:
SFH Owner Occ 75%
Rental Home 70%
Commercial or Multi fam (Duplexes or Appts) 65%
Developed Land 60%
Undeveloped land 50%
Stacy
My 2¢ - Posted by Marvin Seawood
Posted by Marvin Seawood on December 17, 1998 at 11:20:21:
Reg,
LTV is important, but so is ITV, e.g. $100,000 sale,
$100,000 note; would you be interested if you could
get the note for $70,000?
I would, the 100% LTV is not a problem for me. What
might be a problem would be the terms of the note.
If I did not receive anything for a dozen years, at
which point I received the entire $100,000, $10,000
might be too much too pay.
It would also be a problem if I determined that the
property was worth not $100,000, but $80,000.
So there are (at least) two scenarios in which I
would overlook the LTV and base my buying criteria
on my ITV: High LTV, buying at a significant discount
And acceptable LTV, but property is overvalued.
To some extent, the payor’s credit is important, but
not nearly as important as the property or paper.
The ratios for business, raw land etc. are lower.
And that’s all I know, for the time being. As a
beginner, I’ll stick to SFRs.
Marvin