If you are planning to send me a file to review, it is important to create a favorable scenario for the investor. Of course, you are advocating for the borrower, but there must be a win-win philosophy to ensure the investor is satisfied. Keep in mind the five major criteria investors seek when making private real estate loans. Prepare your executive summary or pro forma specifically addressing these main concerns with viable answers. Remember, keep the story brief and provide any documentation to support the borrower’s scenario.
CASH FLOW OR INCOME OF PROPERTY
USE OF FUNDS & EXIT STRATEGY
BORROWER’S PAST CREDIT HISTORY
LOAN TO VALUE RATIO
TYPE & LOCATION OF PROPERTY
In addition to the brief executive summary, investors want to see a loan application, a credit report, and a recent appraisal (or recent pictures and comps).
Lastly, it is important to highlight the borrower’s cash in the deal (“skin in the game”), as well as understand the intention of the cashout monies, if it is a refinance. The exit strategy is critical in today’s chaotic marketplace. How does the borrower intend to pay off the private investor?
Feel free to call me should you have questions or concerns.
Michael Cushner, Broker