I Almost Lent $60K Without Asking This One Question
Most lenders focus on the upside going in. The return looks good, the borrower seems solid, the property checks out. But the question that actually protects your capital is not “what happens if this works?” It is “what happens if it doesn’t?”
A clean exit strategy answers that question before a single dollar leaves your hands. It means the borrower has a realistic, documented plan to repay you, whether that is a refinance, a sale, or cash flow from the asset. It means the loan-to-value leaves enough cushion to recover your principal even if the market softens. And it means you are in a secured lien position and understand what foreclosure looks like in that state if things go sideways.
Deals that go wrong rarely surprise lenders who asked the right questions up front. They almost always surprise the ones who skipped that conversation because the returns looked too good to slow down for.
Before you lend, know how you get paid back. That single discipline separates investors who grow their capital steadily from those chasing recoveries on deals that looked great at origination.