PMLs - What Do You Need to See Before Funding a Deal?

[Deborah Wodell]

For the private lenders here — what’s the #1 thing you want to see from a borrower before you feel comfortable funding their deal? Is it credit, experience, or just a solid property?

I ask because I just had a tough situation. I lent additional rehab funds to someone who ended up ghosting me for months. I vetted him, had multiple conversations, evaluated the deal, even have him signed a contract and it still went sideways.

Curious to hear from others… what’s been your experience with this, and how do you try to protect yourself? Even though we can’t ever fully predict how things will go, I’d like to know what steps you take to minimize the risk.

[Doug Smith]

Hi Deborah, 

Back in 1991 I had a mentor that told me "the three most important things in lending are ability, ability, and ability...can the borrower pay back the loan." I'm looking for exit strategy, liquidity, and experience...even over the property. We don't over leverage, so funding EMDs and gap funding is something we avoid. We're not in the "loan to own" business. I've seen several crashes since then and the lenders that lose their shirts do so, in part, from going too high on the LTV and ignoring the character and capacity. That being said, you're already in...now how do we get you out. I am not as familiar with CO collection law as I would like to be, but I did spend a long time in bank special assets and our company has collected/foreclosed on its share of deals. Let me know if you want to chat. I'm happy to help you think through solutions.