Private Lenders

Biggest Factors Private Lenders Look At

April 2, 2020 0 comment

In the real estate industry, private lenders can be ideal vehicles for investors who want to finance flips, rentals, or expand their investment portfolio. They offer speed, flexibility, and time-saving documentation as opposed to bank financing.

When deciding which investment deal to finance, private lenders consider many factors. Once you know what they’re looking for, you can boost your chances of financing your investment by preparing for these factors and understanding how they will affect your loan application. Here are 6 criteria that private lenders often consider when evaluating loan applications.


Lenders are interested in how many investment property transactions you’ve completed thus far. Lenders want to ensure that the investor knows the market, is able to spot a good deal and knows all the necessary steps they need to take in order to turn a property into a profitable investment. It shows them you are lower risk and more likely to pay the loan payments on-time. 

If you’re a complete newbie with no real estate investment history, this isn’t a reason to worry, though. Yes, having experience is an advantage, but beginner investors do get private loans. Plus, there are other factors private lenders evaluate.

Does the deal make financial sense?

It’s essential that the deal you’re trying to finance is worth investing in. Lenders want investors to make a profit because this makes it more likely that they’ll be able to afford to pay the loan back. Therefore, finding a good deal is key.

Some aspects you should look for in an investment property are a profitable location, a good cap rate, low rental expenses, and repair costs, as well as the potential of generating income. A property that checks these boxes is an ideal investment.

Location, location, location

Another main criteria lenders care about is the location of the property, which deserves a separate paragraph. Most often, properties located in urban areas have a higher chance of generating consistent and ideal cash flow due to renter demand. The importance here is to do your due diligence and research locations to find the most profitable area for owning an investment property. 

The exit strategy

Private lenders know that choosing a good exit strategy in real estate investing is just as important as choosing the right property. That’s why this is one of the factors they take into consideration. 

An investor who decides to implement a sound exit strategy shows signs of success since the correct approach will ensure minimal risks along with maximized profits. 

House flipping, buy and hold and wholesale deals are just some examples of exit strategies investors opt for. However, the right plan depends on the particularities of each deal, which is why developing a good strategy shows the lender that the investor is wise, analytical, and capable of finding the right way of making a profit.

The investor’s creditworthiness

Private lenders use certain criteria to determine the creditworthiness of an investor. The minimum credit score you need to be eligible for a loan program depends on the property type and varies from lender to lender. Your income, debt, and asset-based qualifications are other factors that private lenders take into account when analyzing an investor’s creditworthiness.

The condition of the asset now and after rehab

Private lenders look at the asset’s condition now and after the rehab. This way, they can decide if the renovation plan is realistic, doable and, consequently, if the property will produce enough cash flow. 
Knowing all of this, you can evaluate more accurately your situation and increase your chances of financing your real estate deals. Our experts at Apollo Square Capital will be happy to help you apply for one of their loan programs and answer any questions you may have. Contact our team at 1-800-928-8343.

The only real estate financing partner you will ever need.

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