All Forum Posts by: 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?

Private money lending offers flexibility like no other—borrowers and lenders can agree on custom terms that suit everyone. No rigid bank rules here! 📑🤝 

#FlexibleFinancing #PrivateLenderPerks

How Do You Identify the Best Real Estate Investment Opportunities for Private Money Lending?

Private money lending can generate returns between 8-12%, sometimes even higher. It’s a great alternative to traditional investments for those looking for high returns. 📈💰 

#HighReturns #InvestmentGoals

How Can Private Lenders Ensure Flexibility While Protecting Their Interests?

Quote from @Steve Hiltabiddle:

Quote from @Karen Smith:

Quote from @Steve Hiltabiddle:

@Karen Smith   @Brandon Croucier provides a very concise but accurate answer.  Other answers might include the acronym CIA:  Credit Income and Assets but that leaves out the items Brandon mentions.   Beyond just the borrower characteristics, you might want to remember the broader 5 'C's' of Credit: Character, Capacity, Collateral, Capital, and Conditions.

As a smaller lender myself, I focus on the Borrower first and their ability to get a project across the line with as little headaches (to me) as possible.  Then once I feel like they may be a suitable borrower for my business model, I consider the deal.   I know others may focus on the deal first but for me, I want to find someone with experience and integrity with an interest in a long term business relationship.  That can take some time, a few phone calls, a site visit, etc but I find it can avoid problems down the road.

Good luck,

Steve

That's a great approach, Steve! Focusing on the borrower first, especially their experience and integrity, can really help mitigate issues down the line. How do you balance the time it takes to vet borrowers—like site visits and calls—with the urgency of closing deals? Do you find that this process pays off in terms of fewer headaches or challenges later in the project?

 Hi Karen,   Again, being a smaller lender, my goal is not to have dozens and dozens of borrowers doing a deal a year but work with experienced borrowers doing 1-2 deals a month.  All I need is a handful of solid active borrowers to keep my money active.  With this approach, I can very easily vet borrowers (no newbies unless partnering with an experienced investor for example) and focus on those that meet my criteria.   More often than not, I'm speaking to someone who isn't in a rush to fund a deal so time is typically available to have a handful of calls, perhaps meet for coffee although a face-to-face is nice but not a requirement.      If I had a lot of capital to deploy I might focus more on the deal first.  After speaking with a number of Investors, there are a number of ways I can get to a quick 'No' either on a deal or the investor which also saves time.  As in any business, there are a lot of tire-kickers which minimizes the amount of time I may spend beyond a quick intro call.

Good luck,

Steve

It sounds like you’ve established a solid approach to lending, focusing on experienced borrowers who can keep your capital active without rushing into deals. I’m curious—what are some of the key factors that help you quickly determine whether to move forward with a borrower or pass on a deal? Do you have a specific set of criteria you rely on, or does it vary depending on the investor and the project?

Also, when you do get a “quick no,” is it more often due to the borrower’s experience, the structure of the deal, or other factors? Would love to hear how you streamline this vetting process and keep things efficient!

Quote from @Amir Khan:

Quote from @Karen Smith:

What Qualities Should You Look for in a Borrower Before Offering Private Money Loans?

You've received some excellent answers from everyone.

I might add, I would also check the track record on completed projects (specifically the type of projects you are interested in funding). Ask for details on those projects including time-line and how unexpected issues/challenges were resolved.

You’ve made a great point about checking the borrower’s track record on completed projects. Seeing how they’ve handled similar projects—especially when things didn’t go as planned—can give valuable insight into their problem-solving skills and reliability.

How do you usually gather this kind of information? Do you rely on references from previous lenders, or do you request more detailed project reports? I'd be interested to hear how you approach evaluating a borrower’s past performance and how that plays into your final lending decision.

Quote from @Chris Seveney:

Quote from @Karen Smith:

What Qualities Should You Look for in a Borrower Before Offering Private Money Loans?

 Skin in the game. Are they putting down money as a down payment and do they have a primary residence they realize they could also lose if they do not pay you (depends on state). 

That is an important factor. When they have a lot to lose, they will perform much better. Also as a sidenote I assume you are lending on non owner occupied homes - never lend on an owner occupied property.

That’s a great point! Having skin in the game definitely makes borrowers more motivated to follow through. When someone has a significant amount of their own money invested or even risks losing their primary residence, it changes their approach and commitment to the project.

Do you typically have a minimum down payment requirement for your borrowers? And how do you usually assess the level of risk in situations where the borrower might not have as much at stake? I'd love to hear more about your approach, especially with non-owner occupied properties.

Quote from @Steve Hiltabiddle:

@Karen Smith   @Brandon Croucier provides a very concise but accurate answer.  Other answers might include the acronym CIA:  Credit Income and Assets but that leaves out the items Brandon mentions.   Beyond just the borrower characteristics, you might want to remember the broader 5 'C's' of Credit: Character, Capacity, Collateral, Capital, and Conditions.

As a smaller lender myself, I focus on the Borrower first and their ability to get a project across the line with as little headaches (to me) as possible.  Then once I feel like they may be a suitable borrower for my business model, I consider the deal.   I know others may focus on the deal first but for me, I want to find someone with experience and integrity with an interest in a long term business relationship.  That can take some time, a few phone calls, a site visit, etc but I find it can avoid problems down the road.

Good luck,

Steve

That's a great approach, Steve! Focusing on the borrower first, especially their experience and integrity, can really help mitigate issues down the line. How do you balance the time it takes to vet borrowers—like site visits and calls—with the urgency of closing deals? Do you find that this process pays off in terms of fewer headaches or challenges later in the project?

Quote from @Brandon Croucier:

Fico, LTV, Experience, Make sure no BK's or Foreclosures.

Those are great points to consider when evaluating potential borrowers. In your experience, how do you weigh each factor—like FICO, LTV, or prior bankruptcies—when making a decision? Also, how much does the borrower’s track record or experience influence your final choice, especially if they've had success with similar projects?