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This episode is all about the pitfalls we have experienced in dealing with lending documents. Didn’t we say before that you should pick an appraiser on the bank approved list? Actually, that’s just the first step. If you read through these appraisal reports, you’ll find that many times the comps they choose are extremely unreliable. They’ll pick comps with huge distances, not even in the same community, or obviously not comparable properties, but they’ll still be selected just because the bedroom count is similar. Or they’ll pick similar properties, but with closing dates before the market downturn. In short, as I... Continue reading

This time, I will be sharing an application which had many twists and turns. When we first looked at the deal, we felt the appraisal was inflated, so we rejected it. But then, after a while, the broker came back and said the borrower was willing to use another property as collateral. This showed some sincerity, so we took a closer look. With two collateral properties, a large house and a small apartment, the combined LTV was almost there, and the asking price and timeline seemed reasonable.Then the interesting thing happened. As per usual, we went on with our checklist,... Continue reading

This is the finale episode for this series and I will try to sum up the due diligence checklist for private lending so you can even do it yourself if interested. Private lending involves borrowers uses their real estate as collateral. Generally, the return on private lending falls in the high single-digit to low double-digit range, depending on each deal.The lending duration typically ranges within 12 months, with some shorter options like 3, 6, or 9 months, but mostly 12 months. There are also occasional deals where a one-year term is renewed for another year. Renewals usually come with additional fees... Continue reading