Loan Balance/Property Value is the Loan Repayment amount divided by the Sale Value (both measured at the beginning of the year). This ratio measures the margin of safety for the lender's principal. This can also be an important number if you are planning to refinance.

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Loan Balance/Property Value Ratio
for commercial real estate
investments and developments

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Why is Loan Balance/Property
Value useful for commercial real
estate?
Loan Balance/Property Value is the Loan Repayment amount
divided by the Sale Value (both measured at the beginning of
the year). This ratio measures the margin of safety for the
lender's principal. This can also be an important number if you
are planning to refinance.

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Loan Balance/Property Value
Considers / Ignores
• Considers: Sale Value and Loan Balance
• Ignores:Time Value of Money, Sales Proceeds
... and a lot of other things

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1. Sale Value (Current Year Only)
2. Loan Balance (Current Year Only)
What is the
Loan Balance/Property Value
Sensitive to?

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Loan Balance/Property Value
Example
2010 2011 2012 2013 2014 2015
Less: Loan Repayment 2,164,359 2,113,745 2,141,394 2,079,651 2,012,784 1,940,367
Sale Value $3,329,006 $3,591,128 $3,800,275 $3,698,723 $3,795,175 $3,560,371
Loan Balance/Property Value 65.0% 58.9% 56.3% 56.2% 53.0% 54.5%
2012 Loan Balance 2,141,394
divide by 2012 Projected Sale Value $3,800,275
equals the 2012 Loan Balance/Property Value 56.3%

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Watch Video
about Loan Balance/Property Value

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Try out this ratio yourself !!!
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