Loan-to-Value Calculator

What Is Loan-to-Value (LTV) in Real Estate?

Loan-to-value (LTV) is the ratio between the amount of debt financing a property and the property’s total value, expressed as a percentage. It tells you what share of a property is funded by a loan versus owner equity. A lower LTV means more equity and less leverage; a higher LTV means more borrowed money relative to the asset’s worth.

Lenders use LTV to gauge risk, and real estate investors use it to understand how a property is capitalized. In the context of a 1031 exchange, LTV becomes especially important because the IRS expects you to carry comparable debt and equity from your old property into your new one.

How Is LTV Calculated?

The formula is simple — divide the loan amount by the property’s value:

In that example, 75% of the property is financed with debt and the remaining 25% ($50,000) is equity. DST offerings on the Exchange-X marketplace typically carry LTVs in the 45%–65% range, though some are all-cash (0% LTV) and others are higher.

LTV and the 1031 Exchange “Equal or Up” Rule

To fully defer your capital gains tax in a 1031 exchange, the IRS generally requires that you replace both your equity and your debt by acquiring a replacement property of equal or greater value than the property you sold. This is often called the “equal or up” rule, and it has two components working together.

1. Replacing Your Equity

You must reinvest all of your net sale proceeds (your equity) into the replacement property. If you sold a property for $1,000,000, paid off a $400,000 mortgage, and walked away with $600,000 in equity, you generally need to put that entire $600,000 back into the replacement property. Any cash you keep is taxable “boot.”

2. Replacing Your Debt

You must also replace the debt you paid off — at least dollar-for-dollar. Continuing the example above, the $400,000 mortgage that was paid off at closing must be matched on the replacement side. You can satisfy this requirement by:

• Taking on a new mortgage of equal or greater value on the replacement property;
• Acquiring an interest in a debt-financed property (such as a DST) that carries comparable debt; or
• Contributing additional cash out of pocket to make up the difference instead of borrowing.

Put simply: in a fully tax-deferred exchange, your replacement property’s value should equal or exceed the value of what you sold, your equity should be fully reinvested, and your debt should be equal to or greater than the debt retired — or any debt shortfall replaced with new cash.

What Is Boot — and How LTV Causes It

“Boot” is any value you receive in an exchange that is not like-kind property — and it is taxable. There are two common kinds, and LTV is central to the second:

• Cash boot — sale proceeds you keep instead of reinvesting.
• Mortgage (debt-reduction) boot — when the debt on your replacement property is less than the debt on the property you relinquished. The reduction in your loan balance is treated as income, because money you previously owed now stays in your pocket.

This is why matching your LTV matters. Choosing a replacement property with a similar (or higher) loan-to-value helps you replace the debt you paid off and avoid an unexpected tax bill.

How DSTs Help You Match Debt and Equity

When you invest in a Delaware Statutory Trust (DST), you purchase beneficial interests in a trust that already owns the underlying real estate — including its financing. Because a portion of the DST property is financed, you acquire a proportional share of both the equity and the loan.

This structure makes DSTs a practical tool for satisfying the debt-replacement requirement. You don’t have to personally qualify for or guarantee the loan — the debt is non-recourse to you — yet your share of it still counts toward the debt you need to replace. DST sponsors deliberately structure offerings at a range of LTVs so investors can match the leverage of the property they sold. Exchange-X provides access to dozens of DST offerings across that LTV spectrum.