What do private lenders look for in a borrower?
I’ve said it before and I’ll say it again: this is a people and relationships business; This is not about real estate! Yes, we transact, operate, and profit from real estate, but let’s face it, there are no people … “No deal!”
We also spend much of our time lending to borrowers we can trust. My job is to raise money from investors to finance your mortgage and TRUST is the only word that matters to achieve this. If there is no trust, there is no deal. Investors who participate in our mortgages trust that we are putting their funds in the hands of trusted people.
Good borrowers also have:
1. Leadership Skills: Let’s face it, there are many moving parts to real estate deals and possess the internal leadership skills to guide contractors, accountants, attorneys and other stakeholders and participants in order to get the benefit you deserve in your business. the deal is essential. This does not mean abusing power or privilege, it just means having the ability to inspire and guide those who are in the service of your project effectively.
2. Exit Strategy, Exit Strategy, Exit Strategy – Your project must have a strong earnings strategy and that is the direct result of knowing exactly how you intend to exit the deal and withdraw your mortgage funds. Disposal of property through sale is the most common method, but refinancing from another longer-term lender, such as a bank, is also frequently relied upon. In the end, your lender will have to be satisfied that the higher interest rates you will pay will be addressed and withdrawn within the timeframe that you and the lender agree to.
3. Know the answers: There is no better way to start building credibility than by knowing the answers to questions about your deal during meetings and other communication timers. This does not mean that you have to be an encyclopedia of definitions and details. However, it does mean that you know the answers to most of the questions and you know where to get the answers to the ones you don’t.
4. He is the person to turn to: During the entire term of the loan, from the application to the complete liquidation of the property, someone should be the key contact. Nothing is more frustrating than dealing with multiple people when evaluating a deal. That is not to say that other stakeholders and key people in the deal should be ignored. The principles, officers and directors of the borrowing legal entity have contributions to the process of evaluating the deal. Invariably, their knowledge, value, and contribution to your business are critical. What I’m saying is that someone should be the project leader and be as available as possible for communication purposes. If you are not as comfortable talking about certain parts or sections due to knowledge limitations, be sure to participate in all meetings with designated people on your team so that communication can take on a more fluid and efficient way.