Experienced Private Lender – Struggling to Find Borrowers Lately
Hey everyone,
I’ve been in the private lending space for a while now, mostly focused on short-term deals like fix and flips and bridge loans. I’ve had some solid borrowers in the past, but lately it’s been tough finding new deals that make sense — or even hearing from serious borrowers at all.
I’m curious if others are seeing a slowdown on their end too, or if maybe I need to adjust how I’m getting in front of folks. I’ve always relied on referrals and repeat clients, but that pipeline seems to be drying up this year.
Not here to pitch anything — just genuinely looking to connect and swap notes with other lenders (or even investors) to see how you’re staying active and protected in today’s market.
Most Popular Reply
I think part of it too is that real estate investors are struggling as well. We may have excellent deals, but because of the not so good credit or lack of cash or both we can't get the time of day. I have 4 such deals that I'm having trouble getting funding for those reasons. Also, there seems to be significantly fewer actual private money INVESTORS. The vast majority of people calling themselves private lenders are really masquerading as HMLs with their very similar underwriting criteria and loan fees. A true private investor is just a person (or a few people) who just want to put their capital to work for them. There are no underwriting criteria in terms of minimum credit score, minimum cash balance, loan fees (org fee, doc fee, legal fee, processing fee, etc.). They are just regular people who look at the deal and simply decide it they want to do it or not. A sample deal would be a fix n flip SFR where the purchase, rehab, title co fees, insurance, etc. is $90,000. ARV $150,000, more than enough profit to split on the back end or pay a set effective interest rate. I personally pay my investors 20% ROI or 50/50 split on the back end, whichever is higher. They don't ask for my credit score, bank statements, make me pay for an upfront appraisal (comps are fine), or require a down payment. They don't even require monthly payments, which is another deal stopper for some investors. I looked up that the payments can be part of the loan if the lender allowed them to be. So the true private investor simply invests the $90k and gets back the $90k plus 20% or 50/50 split of the profit. They will talk to me to make ensure my experience, make sure I'm knowledgeable, have my contracting team in place and can get the job done and do whatever due diligence they want on the actual property, but it's all pretty simple and easy. I get there are lending laws (which are a lot more flexible for business to business than business to consumer), and I also get there are risk factors of foreclosure. But I think part of your problem is the criteria is so stringent to mitigate the risk very few deals or borrowers qualify. So it's not so much that there's a shortage of deals or borrowers, just lack of creativity on the lender or broker part to make a good deal work. So a borrower has to find a private INVESTOR for the first few deals to build up cash and maybe fix the credit, then they can qualify with a typical lender after that. But as I said at the beginning, borrowers are struggling too and since private INVESTORS seem to be in few supply these days, they can't find funding for their excellent deals to climb that lending ladder. Sorry for the long post!