How to Vet a Borrower as a First-Time Private Lender

How to Vet a Borrower as a First-Time Private Lender

Becoming a private lender can be a rewarding way to generate passive income, especially when your investments are backed by real estate. But before you hand over your hard-earned money, it’s essential to thoroughly vet the borrower. Here’s a simple step-by-step guide to help you get started with confidence.

1. Evaluate Their Experience

Ask the borrower about their track record. Have they completed similar real estate deals before? Do they have experience in fix-and-flip or rental property management? An experienced borrower is generally less risky, especially if they’ve weathered different market conditions.

2. Review the Property

Ensure the investment is secured by a tangible asset. Ask for the property’s address, photos, and comparable sales in the area. Understand its current market value and the after-repair value (ARV) if it’s a rehab project. The equity spread between your loan amount and the property's value is your margin of safety.

3. Check Credit and Background

While not as stringent as a traditional lender, you should still review the borrower’s credit report and background. Red flags like recent bankruptcies, foreclosures, or criminal activity should be addressed.

4. Request Documentation

Make sure your investment is secured with:

• A promissory note

• A mortgage or deed of trust

• Proof of insurance with you named as the additional insured

Use a title company or real estate attorney to prepare and record the documents.

5. Understand the Exit Strategy

Know how the borrower plans to repay the loan. Will they refinance, sell, or pay you off from rental income? A solid exit plan reduces your risk.

Private lending can be a fantastic way to grow your wealth while helping others—just make sure you protect yourself by doing proper due diligence.

Would you like to know more about investing passively to increase your cash flow? (tip: you can do it from your IRA)   Contact Alex at [email protected] or call 501-580-2598

What We're Working On: Navigating Probate and Foreclosure Together

This week, we’re diving deep into the world of probate—and for good reason.

When working with families facing foreclosure, we’ve noticed a common pattern: often, the foreclosure process begins after the passing of a loved one. In many cases, the deceased homeowner was the only one listed on the title or mortgage. As the family grieves, they may not be fully aware of the options available to them regarding the inherited property—or even that they have options at all.

Whether the heirs choose to keep the property or sell it, one thing is typically required before anything can move forward: probate. Probate is the legal process that determines who the rightful heirs are and gives them the authority to act on behalf of the estate.

That’s where we come in.

Our goal is to help families understand their rights and guide them through their options. If selling the property is what they decide is best, we may be in a position to purchase the home—providing relief, clarity, and a respectful resolution during a very difficult time.

We’re not just here to buy houses. We’re here to walk with people through complex situations with compassion, offering real solutions when they’re needed most.

Would you like to know more about how you can help families in tough situations while growing your retirement nest egg at the same time? Contact Alex at [email protected] or call 501-580-2598