Things to look for when vetting your potential borrower

[Jonathan Chan]

As private money lenders, protecting your investment starts with careful borrower vetting. Here are some key red flags to watch for:

🔴 Lack of experience: A borrower without a proven track record in real estate projects may struggle to navigate unexpected challenges.

🔴 Overly optimistic projections: Unrealistic ARV (after-repair value) or underestimated rehab costs can signal poor planning—or worse, a lack of transparency.

🔴 Incomplete or disorganized documentation: Missing detailed plans, financial statements, or timelines could mean the borrower isn’t ready to execute the project successfully.

🔴 Over-leveraged finances: Borrowers with excessive debt or insufficient personal capital invested in the deal could pose a greater risk of default.

🔴 Questionable property comps: Overstated market values or inappropriate comparables may mean they’re inflating expectations.

As always, thorough due diligence is your best protection. Working with vetted, trustworthy borrowers and maintaining a robust vetting process will help ensure your capital works as hard as you do! 💼💰