What Private Lenders Look For in a Deal

What private lenders look for in a deal

The short answer

Private lenders underwrite four things: the asset (as-is and after-repair value), the exit (how the loan gets repaid), the borrower (experience, credit, and reserves), and the numbers (leverage, budget, and margin of safety). Because these loans are asset-based, the property and the exit carry the most weight — a strong deal with a clear exit can get funded even for a newer investor.

Understanding how a private lender thinks lets you package a deal that gets a yes — and better terms. It comes down to four questions every lender asks.

1. The asset

The property secures the loan, so its value is the foundation. Lenders assess the as-is value, and on value-add deals the after-repair value (ARV) supported by real comparable sales. A defensible valuation is what lets a lender lend confidently.

2. The exit

Every private loan is short-term, so the lender wants to know exactly how it gets repaid: a sale, a refinance into long-term debt, or a stabilization plan. A clear, documented exit is often the difference between an approval and a decline.

3. The borrower

Even on asset-based loans, the borrower matters at the margin. Experience earns better leverage and pricing; credit affects rate; and cash reserves to carry the project and absorb overruns reduce the lender's risk. None of these usually make or break a strong deal, but each one moves your terms.

4. The numbers

Finally, the lender checks that the math has a margin of safety: sensible leverage (LTV and LTC), a realistic budget, and enough spread between all-in cost and value that the deal survives a soft market. Deals that only work if everything goes perfectly are the ones lenders decline.

Package all four — asset, exit, borrower, numbers — into a tight one-page summary, and you make it easy for a lender to say yes.

Frequently asked questions

What do private lenders care about most?+

The asset and the exit. Because the loan is secured by and repaid from the property, its value and a credible repayment plan carry the most weight.

Do I need experience to get funded?+

Not necessarily. Experience improves your terms, but a strong deal with a defensible value and a clear exit can get funded even for a newer investor with adequate reserves.

What is a margin of safety?+

Enough spread between your all-in cost and the property's value that the deal still works if the market softens or costs run over. Lenders look for it in every file.

How can I improve my chances of approval?+

Present a defensible valuation, a clear documented exit, adequate reserves, and realistic numbers — packaged into a concise summary that answers all four lender questions.

What private lenders look for in a deal

1. The asset

2. The exit

3. The borrower

4. The numbers

Frequently asked questions

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