How to Vet a Real Estate Flipper Before You Lend Them a Dime
If you’re deploying private capital into fix-and-flip deals, the deal isn’t the only thing you’re underwriting you’re underwriting the operator. Here’s what I look for before anyone gets my money:
1. Ask for the HUD statements Anyone claiming a strong track record should be able to hand you Closing Disclosures from past deals. These show the real numbers actual purchase price, sale price, and costs not the highlight reel version. If they can't produce them, that's your answer.
2. Stress-test the ARV Flippers pitch deals based on After Repair Value. Your job is to challenge it. Pull your own comps. If their ARV is optimistic and the deal goes sideways, that's your capital at risk not theirs.
3. Know your LTV before you commit On fix-and-flip deals, stay at your specific LTV percentage gives you a real equity cushion in a forced sale scenario. Don't let a good story talk you into a thin position.
4. Confirm you’re in first lien position This should be non-negotiable. First lien means you get paid before anyone else if the asset gets liquidated. Always verify this with a title search before funding.
5. Ask about their draw schedule Releasing funds in draws tied to construction milestones not as a lump sum keeps you in control of the rehab. Any experienced flipper will be familiar with this structure. Hesitation here is a yellow flag.
6. Skin in the game If the flipper has zero equity in the deal, their downside and yours are not the same. Look for operators contributing their own capital alongside yours.
7. References from other private lenders Ask if they’ve worked with private money before and request a reference. A flipper with clean seasoning and a real track record won’t flinch at this question. Private lending can be a strong vehicle predictable returns, real asset backing, and you’re earning points plus interest while someone else does the work. But none of that matters if you didn’t vet the operator first.
What’s your due diligence process look like? Anything you’d add?