Would You Lend Your Own Money on Every Deal?

Here’s a question I occasionally ask myself when looking at a loan: would I lend this guy my own money?

Not the lender’s money. Mine. My, say, $300,000. Money that came out of my bank account this morning and that I would very much like to see again.

Suddenly underwriting feels a little different. The borrower qualifies. The numbers fit. There’s enough equity. The appraisal supports it. The exit strategy is plausible. I know lenders that will do the deal. Professionally, I can say: "This works."

But then that little voice asks: "Okay, Drago. Would you write the check?" And sometimes my answer is: "Hell no." That bothers me. Because if I wouldn’t risk my own $300,000, why am I working so hard to convince somebody else to risk theirs?

It sounds like a devastating question. I’m not sure it actually is. Because my money and a lender’s money are not the same thing. If $300,000 represents a huge portion of everything I have, lending it to one borrower would be insane almost regardless of how good the deal is. A lender may have hundreds or thousands of loans. They have diversification. Underwriting rules. Pricing models. Collateral requirements. Reserves. Lawyers. Servicing. Foreclosure procedures. They’re not asking: “Drago, do you personally feel comfortable?” They’re asking whether this particular risk fits their business. And risk has a price. A deal I wouldn’t touch at 7% might make perfect sense to somebody at 12%, with enough equity underneath it and the right protections.

So “Would I lend my own money?” cannot be the underwriting standard. But I still think it’s a hell of a useful question. Because it removes something from the conversation: the commission. The desire to close. The borrower who really wants the property. The lender who has a program that technically fits. The three weeks I’ve already spent getting everybody this far.

For a moment, all of that disappears. It’s my money. Would I do it? And if my stomach immediately says no, I want to know why. Maybe I don’t trust the exit. Maybe the borrower’s experience looks better on paper than it feels after talking to him. Maybe the rehab budget is optimistic. Maybe the appraisal is doing too much of the heavy lifting. Maybe there’s nothing actually wrong with the deal. It simply exceeds my personal appetite for risk. Fine. But now I know.

I think that distinction matters. My job isn't to lend only on deals I would personally invest in. And it certainly isn't to substitute my gut for a lender’s credit policy. But I also don't want to become so good at fitting transactions into lending boxes that I stop noticing when something about a deal makes me uncomfortable. A loan can qualify and still deserve another question. And perhaps that's where experience becomes useful. Not as some mystical ability to smell bad deals from across the room. More as an alarm bell. The alarm doesn't tell me the building is on fire. It tells me to find out why the alarm is ringing.

So maybe the nuclear question isn't actually "Would I lend my own money on this deal?" Maybe it's the question immediately after it "If the answer is no, why the hell not?" That's the answer I want before I ask anybody else to write the check.