The property is important to us, and the numbers must
show the deal will produce a fair profit, but as direct lenders (i.e., we lend our own money) we always bet on the borrower first. A bad borrower can ruin even a good deal. A good, well-qualified borrower will rarely get into trouble.
“How do you balance the time it takes to vet borrowers—like site visits and calls—with the urgency of closing deals?”
There’s nothing to balance. We meet our borrowers in advance of any deal, typically first at a real estate club, and we spend time getting to know them. This usually involves going to dinner once or twice and visiting their properties if they happen to have something in progress. We also review prior closing statements. In our experience, the only way to judge a person’s character is face-to-face. On the rare occasion that we get an urgent call from someone we haven’t gotten to know yet, we politely decline the loan.
If you are dealing with borrowers who have been doing this since the crash, then almost certainly, they will have a bankruptcy around 2010 or so. We also know several who got hit hard when lenders shut/slowed down during COVID. It’s no big deal so long as their bankruptcy is over. Foreclosure is another issue. This tells us they might not be as skilled as they want us to believe.
We only lend to local, experienced house flippers who do this full-time. We require at least three successful local flips in the last two years, which isn’t much. In fact, virtually everyone we loan to has flipped many more properties. No newbies or hobbyists. Not on our dime. Sorry, but real estate must be your profession.
If you are brokering to others, an affiliate, or a correspondent, then none of this matters. Your lender, who provides the funds, will have their own borrower criteria, which they should communicate to you.
