If someone asks to borrow your money for a real estate project, you’re allowed to ask a lot of questions. You’re supposed to.
I’m a borrower. I’ve sat across from lenders who asked hard questions and lenders who barely asked any. The ones who asked hard questions became the best relationships I have. The ones who didn’t ask made me nervous — because if they didn’t understand the risk going in, they’d be blindsided if anything went wrong.
So here’s the checklist I’d want any careful lender to use. On any borrower. Including me.
About the borrower
Start with the person. The property secures the loan, but the borrower is the one who has to make the plan work.
- How long have you been investing, and what kinds of projects have you completed?
- Can I see a finished project, in person if possible?
- What went wrong on a past project, and how did you handle it?
- Have you ever been late on a loan, asked for an extension, or defaulted? What happened?
- How many projects do you have going right now, and how are they funded?
- Who’s on your team — contractor, closing attorney, insurance agent, bookkeeper?
- What reserves do you keep for overruns and delays?
- Does anyone besides the property stand behind this loan? Who is personally liable?
Listen to how they answer, not just what they say. A borrower who can tell you plainly about a project that went badly — and what they changed afterward — is often more trustworthy than one who claims every deal was perfect.
About the property and the plan
Next, understand the specific deal you’re being asked to fund.
- What are you paying, and how did you arrive at that price?
- What will the property be worth after the work, and which sold comps support that?
- What’s the scope of work, and is there a written contractor bid?
- What contingency is built into the budget for surprises?
- What’s the timeline for purchase, renovation and exit, and what could delay it?
- What’s your exit — sale, refinance, or something else?
- If the first exit fails, what’s the backup?
- Has the property been inspected? Any known issues with the foundation, roof, water, septic or title?
If you want to learn how a disciplined borrower should be answering these, read my deal underwriting sequence and the guide to pulling comps for real estate investing. You don’t need to become an expert. You need to recognize when someone’s answers are fuzzy.
About the paperwork
Then move to how the loan will be documented and secured. Each document’s job is laid out on the mechanics page.
- Who is drafting the promissory note and mortgage? Can my own attorney review them?
- Will the mortgage be recorded, and in what lien position?
- Is there any other lien on the property now, or planned later?
- Will I receive a lender’s title insurance policy?
- Will I be named as mortgagee on the hazard insurance, and can I see the declarations page before closing?
- Which closing attorney is handling the closing, and will funds go through their trust account?
- If renovation money is held back, how are draws requested, verified and released?
- Who services the loan and keeps the payment records?
- What happens if the loan isn’t paid off by the due date?
If a borrower suggests skipping any of these — “we don’t need title insurance,” “just wire it to me,” “we’ll record it later” — stop.
About the bigger picture
A few questions that help you understand the borrower’s whole operation, not just this one loan:
- How do you find your deals? (Consistent deal flow suggests a real business.)
- Who else do you borrow from, and how many private lenders do you work with?
- Are you raising money from many people or pooling funds? If so, has a securities attorney been involved?
- How do you communicate with lenders during a project? How often, and in what form?
- What happens to my loan if something happens to you?
That pooling question matters. One lender on one property, secured by a recorded mortgage, is a private loan. Pooled money or public advertising for lenders can bring securities laws into play.
Questions to ask yourself
The borrower isn’t the only one who should be vetted. Before you lend, be honest with yourself:
- Could I live without this money for longer than planned?
- Is this a small enough share of my savings that a bad outcome wouldn’t hurt my family?
- Do I understand every document I’m signing?
- Have I talked to my own attorney and CPA?
- Am I lending because I understand it, or because someone made it sound easy?
If any answer makes you uneasy, wait. There’s no deadline on learning. My honest rundown of lending risk is worth a slow read before you decide anything.
Verify what you can
Questions are only half the work. Verify where it’s practical:
- Look up recorded deeds and mortgages on properties the borrower says they’ve done.
- Visit a completed property.
- Confirm the closing attorney and title company are real and involved.
- Ask for the insurance declarations page directly from the agent if you can.
- Talk to other professionals who’ve worked with the borrower, if they’re willing.
Use it on me
I wrote this list knowing that anyone who reads it might use it on me. That’s the point. If you’d like to have that conversation, join the inquiry list — bring the list with you. For the full overview, start at private money lending, and for local context on how South Carolina closings work, read about closing attorneys in South Carolina.
Questions people ask
How do I vet a real estate investor before lending?
Ask about their completed projects, their team, how they value property, their scope of work, their exit and backup exit, and how they’ve handled problems. Then verify what you can: talk to their closing attorney’s office, check public records, and visit a finished project. Have your own attorney review the documents.
What are red flags in a real estate borrower?
Pressure to decide quickly, reluctance to use attorneys, requests to wire funds directly, vague answers about the exit, promises that you can’t lose, and defensiveness when you ask about past problems. Any one of those is reason to slow down.
Should I visit the property before lending?
Yes, if you can. Seeing the property, the neighborhood and the condition gives you context no spreadsheet can. Ask the borrower to walk you through their scope of work on site.