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 relationship business; It’s not about real estate! Yes, we transact, operate and profit from real estate, but let’s be real: 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 get it done. 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 possess:
1. Leadership Skills – Let’s face it, there are many moving parts in real estate deals and possessing the internal leadership skills to guide contractors, accountants, attorneys, and other stakeholders and participants in getting the profit you deserve in your business. treatment is critical. This does not mean abusing power or privilege, it just means having the ability to inspire and guide those who serve your project effectively.
2. Exit Strategy, Exit Strategy, Exit Strategy – Your project needs to have a solid profit strategy and that is a direct result of knowing exactly how you intend to exit the deal and withdraw the mortgage funds. Disposing of the property through a sale is the most common method, but refinancing from another longer-term lender, such as a bank, is often relied upon as well. In the end, your lender will have to be satisfied that the higher interest rates you will be paying will be addressed and removed within the time frame that you and the lender agree to.
3. Know the answers: There’s no better way to start building credibility than by knowing the answers to questions about your business during meetings and other moments of communication. This doesn’t mean you have to be an encyclopedia of definitions and details. However, it does mean that you know the answers to most questions, and you know where to get the answers to the ones you don’t.
4. You’re the go-to person: Throughout the life of the loan, from application to full property liquidation, someone should be your key contact. Nothing is more frustrating than dealing with multiple people when evaluating a deal. That’s not to say that other stakeholders and key people in the deal should be ignored. The principals, officers and directors of the borrowing legal entity have input into the agreement evaluation process. 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 discussing certain parts or sections due to knowledge limitations, be sure to participate in all meetings with your team’s designated individuals to make communication smoother and more efficient.
