What wins time or leverage?

Question

Which program would you take if you had to choose: a no-appraisal loan at 65% LTV for speed and certainty, or a full appraisal loan at 75% LTV with more leverage but delays and risk of a low value? What wins time or leverage?

Ricardo R. · Answer

Hey Drago,

Both options have a place—it really depends on your strategy and the deal. Here are examples where each one can shine:

1. No-Appraisal Loan (65% LTV) – When Speed Wins

• Example:
You’re buying a distressed property at a big discount, and the seller wants to close in 10 days. Competitors are circling, and a fast close gets you the deal.


Purchase Price: $200K


Loan at 65% LTV = $130K (you bring $70K cash)


After repairs, it’s worth $300K, so your speed beat everyone waiting on appraisals.
• Purchase Price: $200K
• Loan at 65% LTV = $130K (you bring $70K cash)
• After repairs, it’s worth $300K, so your speed beat everyone waiting on appraisals.

Example:
You’re buying a distressed property at a big discount, and the seller wants to close in 10 days. Competitors are circling, and a fast close gets you the deal.

• Purchase Price: $200K
• Loan at 65% LTV = $130K (you bring $70K cash)
• After repairs, it’s worth $300K, so your speed beat everyone waiting on appraisals.

Purchase Price: $200K

Loan at 65% LTV = $130K (you bring $70K cash)

After repairs, it’s worth $300K, so your speed beat everyone waiting on appraisals.

This works best when:

• You have cash reserves or partners for the bigger down payment.
• Equity upside is large enough that missing the deal costs more than the extra 10% down.

You have cash reserves or partners for the bigger down payment.

Equity upside is large enough that missing the deal costs more than the extra 10% down.

2. Full-Appraisal Loan (75% LTV) – When Leverage Wins

• Example:
You’re buying a stabilized rental with plenty of time before closing—no bidding war, no motivated seller.


Purchase Price: $200K


Loan at 75% LTV = $150K (you bring $50K cash)


Appraisal risk is low because comps are solid, and you want to keep more cash for the next deal.
• Purchase Price: $200K
• Loan at 75% LTV = $150K (you bring $50K cash)
• Appraisal risk is low because comps are solid, and you want to keep more cash for the next deal.

Example:
You’re buying a stabilized rental with plenty of time before closing—no bidding war, no motivated seller.

• Purchase Price: $200K
• Loan at 75% LTV = $150K (you bring $50K cash)
• Appraisal risk is low because comps are solid, and you want to keep more cash for the next deal.

Purchase Price: $200K

Loan at 75% LTV = $150K (you bring $50K cash)

Appraisal risk is low because comps are solid, and you want to keep more cash for the next deal.

This works best when:

• You want to maximize leverage and recycle cash quickly.
• Timing isn’t as critical as long-term financing terms.

You want to maximize leverage and recycle cash quickly.

Timing isn’t as critical as long-term financing terms.

My Opinion:

• Speed wins when the deal is time-sensitive or ultra-competitive.
• Leverage wins when the market is stable, the appraisal risk is low, and you want to stretch your capital further.

Speed wins when the deal is time-sensitive or ultra-competitive.

Leverage wins when the market is stable, the appraisal risk is low, and you want to stretch your capital further.