All Forum Posts by: 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.

That’s a solid question, Li. If you’re thinking about putting your money into another investor’s project instead of just lending at a fixed rate, the biggest thing I’d say is to vet it seriously. Look at the deal numbers, the exit plan, and the borrower’s track record.

But even then, things can still fall apart. I’m actually dealing with one right now, on paper it was a great deal, have some potential buyers already lined up, and everything checked out. Months later, I’m still owed money and the borrower has gone completely dark.

Not saying that’s always the case, but it’s the risk you take with lending money. The upside can be bigger, but so can the headaches if something goes sideways.

Jason, you’re in an interesting spot that a lot of people with older homes in hot redevelopment areas run into. On paper, the numbers you’re looking at with the “tall and skinnies” seem tempting, but there are some key things to weigh before diving in.

If you go the rehab route, you’ll spend less capital and time, but your upside is capped at around $700k. Developers paying $575k for homes like yours aren’t buying the structure, they’re buying the land and the opportunity to maximize its value. That’s why they can pay a strong number and still make sense of the deal.

If you try to play developer yourself, you’d be looking at rezoning, permitting, carrying costs, construction management, and the risk of things going sideways. Even with $300k available, you’d still likely need to bring in partners, private money, or a developer to handle the heavy lift.

One path some owners take is approaching developers directly, not just as a seller, but as a potential JV partner. You contribute the land, they contribute the development expertise and capital, and you share in the upside. It's more complex, but it's how some people bridge the gap between a simple sale and full-blown development.

If you’d prefer less risk and headache, selling directly to a reputable developer now might actually give you a better outcome than rehabbing, since they’ll pay based on the land’s future potential, not just the house’s current state.

Bottom line is weigh your risk tolerance. If you want certainty and less stress, talk to a few developers and see what they’d offer. If you’re open to taking on more complexity for a bigger upside, you could explore a partnership model.

This is such a real scenario, and unfortunately, more common than people think. When subs disappear, time and money bleed fast. I’ve seen it happen where the project stalled for weeks because the investor didn’t have backup contractors lined up.

I think your approach of documenting immediately and stepping in with vetted backups is spot on. My advice for investors is to always have at least two reliable subs in your back pocket for each trade. It may feel redundant at first, but when things go sideways, it’s the difference between a small delay and a disaster.

Really solid points in this thread. From what I'm seeing, a lot of this "race to the bottom" is being driven by competition for deal flow and secondary market appetite. DSCR and fix-and-flip loans look attractive when there's cash on the sidelines and investors chasing yield, but at the same time, it's easy to see underwriting loosening in ways that don't line up with long-term sustainability.

I think the bigger question is how long this kind of pricing can realistically hold before credit risk forces a correction. Like Doug mentioned, cycles always repeat themselves, high LTVs and aggressive terms feel great until the market shifts. DSCR at mid-6s makes sense if the fundamentals are there, but fix-and-flip under 10% just feels like a mismatch to the risk.

Honestly, in most cases it ends up being pretty transactional. Lenders are mainly focused on getting deals funded and closed, not necessarily on sending referrals or building long-term networks for investors. Some may drop a connection here or there if it aligns with their own pipeline, but I wouldn’t count on it as a steady source of referrals. If you’re working with lenders, I’d approach it with the mindset that their role is financing first and everything else is just a bonus.

Interesting situation, Gregory. From what I've seen with DSCR loans, the personal guarantee is tied to the borrower's original underwriting, so most lenders won't just "swap out" guarantors without treating it like a refi. Adjusting LLC ownership on paper usually doesn't change that requirement, since the guarantee is what gave the lender comfort in the first place.

That said, it’s worth asking your lender directly as  some have more flexibility than others. At the very least, you’ll want to know if modifying ownership without updating the guarantee could trigger issues down the line (like a default clause).

If avoiding a full refinance is the main goal, maybe check if your lender would consider a partial assumption or internal modification.

Great point, Doug. I've been seeing the same thing lately where DSCR is actually coming in better than conventional for investors. A lot of folks still assume agency is always the cheaper route, but the market's flipped a bit. Definitely smart to shop both right now.

Pretty common with DSCR loans. Most lenders will have some version of a prepay, usually a 5-4-3-2-1 or 3-2-1 like you mentioned. It's how they protect their capital since these loans are structured for long-term rental cash flow. That said, there are a few lenders that offer reduced prepay or even step-down options if you're upfront about your exit strategy. If you think you'll sell or refi in 3–5 years, it's worth shopping around a little more so you're not boxed in later.

Cody, it really comes down to your long-term goals and cash flow comfort level. A 15-year term will get the property paid off faster and save you a good amount in interest over time, but it ties up more cash each month. A 30-year keeps your payments lower, gives you more monthly cushion, and frees up cash for other deals.

One thing some investors do is lock in a 30-year for flexibility, then make extra principal payments when the cash flow allows, that way you get the best of both worlds without being locked into the higher payment.