Ensuring Flexibility While Protecting Private Lender Interests

[Karen Smith]

How Can Private Lenders Ensure Flexibility While Protecting Their Interests?

[Richard Mark]

Hi Karen. Generally speaking, knowing your limits & your investors limits as a private lender is most important. Anyone can model profitable scenarios but not everyone can execute. As long as you are always realistic about the collateral value and the borrowers ability to execute the business plan, you can't go wrong. 

Cheers,

Richard

[Brandon Croucier]

Close fast, stay in comfortable LTV positions is the name of the game.

[Jacqueline Wright]

Ensure all terms are clearly outlined in the loan agreement, including repayment schedules, interest rates, default clauses, and any exit strategies.

[Karen Smith]

Quote from @Brandon Croucier:

Close fast, stay in comfortable LTV positions is the name of the game.

Absolutely, staying in a strong LTV position is crucial for minimizing risk, especially when moving quickly on deals. How do you typically evaluate LTV ratios when deciding on funding, and do you have a specific comfort zone in terms of percentage or property type that you prefer to stay within?

[Karen Smith]

Quote from @Richard Mark:

Hi Karen. Generally speaking, knowing your limits & your investors limits as a private lender is most important. Anyone can model profitable scenarios but not everyone can execute. As long as you are always realistic about the collateral value and the borrowers ability to execute the business plan, you can't go wrong. 

Cheers,

Richard

Great points, especially about understanding limits and being realistic about collateral value. When evaluating a borrower’s ability to execute, what specific qualities or track records do you prioritize the most? Are there any red flags that immediately signal a deal might not be worth pursuing, even if the numbers seem solid?

[Brandon Croucier]

Quote from @Karen Smith:

Quote from @Brandon Croucier:

Close fast, stay in comfortable LTV positions is the name of the game.

Absolutely, staying in a strong LTV position is crucial for minimizing risk, especially when moving quickly on deals. How do you typically evaluate LTV ratios when deciding on funding, and do you have a specific comfort zone in terms of percentage or property type that you prefer to stay within?

 It really depends on the scenario.

If someone is in deep waters, BK, foreclosure, terrible credit, etc.

You don't want to be above 60% LTV as that borrower has an incredible risk of default.

***You'd want to make it worthwhile to foreclose and also be safe***

If someone is an A Paper borrower just needing to close fast, some of my investors will go 75 LTV.

You can also always feel more comfortable on a purchase rather than a refi, as people are bringing skin into the game, not trying to exit.

[Karen Smith]

Quote from @Brandon Croucier:

Quote from @Karen Smith:

Quote from @Brandon Croucier:

Close fast, stay in comfortable LTV positions is the name of the game.

Absolutely, staying in a strong LTV position is crucial for minimizing risk, especially when moving quickly on deals. How do you typically evaluate LTV ratios when deciding on funding, and do you have a specific comfort zone in terms of percentage or property type that you prefer to stay within?

 It really depends on the scenario.

If someone is in deep waters, BK, foreclosure, terrible credit, etc.

You don't want to be above 60% LTV as that borrower has an incredible risk of default.

***You'd want to make it worthwhile to foreclose and also be safe***

If someone is an A Paper borrower just needing to close fast, some of my investors will go 75 LTV.

You can also always feel more comfortable on a purchase rather than a refi, as people are bringing skin into the game, not trying to exit.

That's an interesting perspective, especially regarding the different LTV thresholds based on the borrower's situation. How do you typically evaluate or assess the level of risk when dealing with more complex scenarios, like foreclosures or borrowers with bad credit? Do you find that certain factors weigh more heavily in your decision-making process for these types of deals? Also, when considering purchases versus refis, do you have specific criteria that help you feel more comfortable with the level of risk involved?