# What is a good LTV for a commercial property?

Most commercial real estate lenders won’t offer a loan if the LTV is higher than 80%. That’s because the higher the LTV is, the more risk of default there is to the lender. In general, the more “skin in the game” a borrower has with a large down payment, the better the terms will be.

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## Moreover, how do you buy a million dollar commercial property?

“If you’re wanting to borrow a million dollars, you have to have at least \$100,000 after closing; \$150,000 or \$200,000 is even better.” Other times lenders may require 6 to 12 months worth of principal and interest payment. If the monthly payment is \$10,000, for example, a lender may want to see \$120,000 in liquidity.

Also to know is, how do you calculate loan-to-value on commercial real estate? Calculating the loan-to-value is a simple formula: LTV Ratio = Mortgage Amount/Purchase Price (or appraised property value). For example, let’s say you’re purchasing a commercial building worth \$1,000,000. You put a cash down payment of 30% or \$300,000.

## Beside this, what are the primary ratios that commercial property lenders use?

Generally, commercial real estate loans come with a loan-to-value ratio (LTV) of around 65% to 80%. For example, if the property is appraised at \$200,000 and the lender requires a 70% LTV, you’ll be expected to put down \$60,000 to receive a loan of \$140,000.

## What is the debt to income ratio for commercial loans?

Your small business DTI ratio should be below 50 percent if you want to be considered for a loan. This means that less than half of your profits are being used to repay debt. To maximize your chances of loan acceptance, aim for a DTI ratio of 36 percent or less—the lower the better.

## What ratio do banks look at commercial loans?

When a commercial lender underwrites a commercial loan, he will use five financial ratios – (1) the loan-to-value ratio, (2) the debt service coverage ratio, (3) the operating expense ratio, (4) the debt yield ratio, and (5) the debt ratio.