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LTC tells a lender how much of your project they're funding. Get it wrong and you'll either leave money on the table or lose the deal entirely.

A guy called me last spring — contractor, good with his hands, had been watching the fix-and-flip market in Sierra Vista for a couple years and finally found a beat-up house on Fry Boulevard he wanted to buy and renovate. He had a private lender lined up, thought he understood the deal. Then the lender mentioned "LTC" and he went quiet.

"Frank, what does that even mean?"

Good question. Let me break it down.

LTC in Plain English

Loan-to-Cost, or LTC, is simply the percentage of your total project cost that a lender is willing to finance. That's it.

Here's the formula:

LTC = Loan Amount ÷ Total Project Cost

So if your total project cost is $200,000 and the lender gives you $160,000, your LTC is 80%.

The "total project cost" includes everything — the purchase price, the renovation budget, closing costs, carrying costs, sometimes even fees. Not just the purchase price. That distinction matters a lot.

A Real Example

Let's say you find a distressed property in Bisbee for $90,000. You estimate $60,000 in repairs. Add $10,000 in closing costs and carrying costs. Your total project cost is $160,000.

A hard money lender offers 75% LTC. That means:

$160,000 × 0.75 = $120,000 loan
You need to bring $40,000 to the table

That's your skin in the game. Lenders like LTC because it tells them you have something to lose if the project goes sideways.

LTC vs. LTV — Don't Mix These Up

Here's where people trip. LTC and LTV (Loan-to-Value) sound similar but measure different things.

LTV compares the loan to the current or future value of the property
LTC compares the loan to what it actually costs you to do the project

On a fix-and-flip, lenders often look at both. They might cap LTC at 80% and cap LTV at 70% of the after-repair value (ARV). You have to satisfy both limits. Whichever one gives you the smaller loan wins.

I've seen investors get excited about their ARV numbers and forget to run the LTC math. Then they're short on cash at closing and scrambling.

One More Local Example

I worked with a military family at Fort Huachuca — husband was retiring, wife wanted to try house flipping as a second income. They found a place in Huachuca City, solid bones, ugly cosmetics. Here's how the numbers looked:

Purchase price: $75,000
Renovation budget: $35,000
Estimated closing and holding costs: $8,000
Total project cost: $118,000

Their lender offered 80% LTC — so $94,400 in financing. They needed to bring about $23,600 out of pocket. Knowing that number upfront let them plan. No surprises at the closing table.

Common Mistakes to Avoid

Underestimating your renovation budget. If your actual rehab costs run over, your real LTC goes up — even though your loan amount stays the same. That means you're covering more out of pocket than you planned.

Forgetting carrying costs. Every month that house sits, you're paying interest on the hard money loan, plus taxes, insurance, utilities. Those costs belong in your total project cost calculation.

Shopping loans on interest rate alone. A lender offering 85% LTC at a higher rate might actually serve you better than one offering 70% LTC at a lower rate — depending on how much cash you have available.

Assuming LTC and LTV will give you the same number. Run both calculations before you talk to a lender. Know your limiting factor going in.

What You Should Do Next

Before you approach any hard money or private lender on a fix-and-flip or new construction project in Cochise County, sit down and build a simple spreadsheet:

Purchase price
Full renovation budget (be honest — pad it 10-15%)
Estimated closing and carrying costs
Add them up — that's your total project cost
Multiply by the lender's LTC percentage to see your loan amount
Subtract from total project cost to see your cash requirement

If that cash number works for you, great. If not, you need a different deal or a different lender.