Key Considerations for Private Lending
Private lenders evaluate several factors to determine the viability of a loan, including:
- Skin in the Game; The borrower's equity stake in the property.
- Equity Strength; The property's current and potential value.
- Highest and Best Use; The optimal use of the property to maximize its value.
- Cash Flow Capability; The property's ability to generate income or its potential for cash flow.
Common Scenarios for Private Borrowers
Most private money borrowers fall into one of the following categories
- Fix and Flip Investors; Purchasing a fixer upper to renovate and sell within 3 to 6 months.
- Buy and Hold Investors; Acquiring a fixer upper to renovate and retain as a rental property.
- Refinancing for Growth; Refinancing existing properties to free up capital for other cash flow opportunities.