You found the deal. The seller agreed to your number. The contract is signed. Now you need capital to close — and the bank is not going to do it in 10 days.
That is where private lenders come in. Private lending is one of the primary capital sources for real estate investors who need to move fast on off-market deals, especially wholesalers and deal originators who source properties for assignment or double-close.
But private lenders are not charities. They do not fund deals because you asked nicely. They fund deals that meet specific underwriting criteria — and understanding those criteria before you pitch is the difference between getting a yes and getting ignored.
This guide walks through the five things private lenders actually evaluate when deciding whether to fund your deal.
How Private Lenders Differ From Hard Money Lenders
Before diving into the criteria, a quick distinction. Private lenders and hard money lenders are related but not identical.
A hard money lender is typically a company or fund that lends on real estate using standardized terms — set interest rates, set LTV ratios, set origination fees. They have a process and an application.
A private lender is usually an individual — a high-net-worth person, a self-directed IRA holder, or a small family office — who lends their own capital on a deal-by-deal basis. Terms are negotiated directly. The underwriting is more personal and relationship-driven.
Both evaluate deals similarly, but private lenders have more flexibility (and more subjectivity) in their decision-making. That is both an opportunity and a challenge for the borrower.
For a detailed comparison of financing options, see our hard money vs conventional loans guide. For bridge financing mechanics, see the bridge loan guide.
The 5 Things Private Lenders Underwrite
1. As-Is Property Value and Exit LTV
Private lenders lend against the property, not your personal financial statement. The first question they ask: what is this property worth today, in its current condition?
Typical LTV range: 65-75% of as-is value. Some private lenders will go higher if the borrower has a track record. Most will not exceed 75% on a first deal.
This means if the property's as-is value is $200,000, the maximum loan amount is $130,000-$150,000. The lender wants a margin of safety — if you default and they have to take the property back through foreclosure, they need enough equity cushion to recover their capital plus costs.
According to Investopedia's guide to private lending, loan-to-value ratio is the single most important metric in asset-based lending because it determines the lender's risk exposure.
What to bring: A broker's price opinion (BPO) or comps analysis showing the property's as-is value. Include 3-5 comparable sales within 1 mile, sold in the last 6 months, similar square footage and condition. The lender will do their own verification, but showing that you have already done the work builds confidence.
2. ARV and the Rehab Plan
Private lenders do not just evaluate where the property is today — they evaluate where it will be after the borrower's planned improvements. The After Repair Value tells the lender what the property will be worth at exit, and whether the deal has enough margin to protect their investment.
What they want to see:
- ARV supported by comparable sales (not by your optimism)
- A detailed rehab scope — line-item budget with costs for each major system (kitchen, bath, flooring, exterior, HVAC, etc.)
- Realistic timeline — most private lenders want to see a 3-6 month project, not an 18-month marathon
- Contractor bids or evidence you have done similar work before
The ARV calculation must be conservative. A private lender would rather see an honest $240,000 ARV supported by solid comps than an aggressive $280,000 based on the best-case scenario. For the methodology behind ARV, see our how to calculate ARV guide.
3. Exit Strategy Clarity
Every private lender wants to know: how do I get my money back?
The exit strategy is the plan for repaying the loan. For wholesale and fix-and-flip deals, the most common exits are:
- Wholesale assignment: The borrower assigns the purchase contract to an end buyer and the loan is repaid from the assignment fee or double-close proceeds. This is the fastest exit — days, not months.
- Fix-and-flip sale: The borrower rehabs the property and sells at ARV. Loan is repaid from sale proceeds. Timeline: 3-9 months.
- Refinance into long-term debt: The borrower rehabs, rents the property, and refinances into a conventional or DSCR loan. The private loan is repaid from the refinance proceeds. This is the BRRRR exit.
Lenders fund deals with clear, realistic exits. They do not fund deals where the borrower says "I'll figure it out later." The exit needs to be defined, the timeline needs to be reasonable, and there should be a backup plan (e.g., "if the flip does not sell in 90 days, I'll rent it and refinance").
4. Sponsor Track Record
Private lenders lend to people they trust. Your track record — how many deals you have closed, whether your previous lenders were repaid on time, and what your reputation is in the market — matters more than a credit score.
For experienced investors: Bring a deal sheet. List your last 10-20 transactions: address, purchase price, sell/refi price, lender, timeline, and outcome. A pattern of successful closings is the strongest argument for funding.
For newer investors: You have less use, but not zero. Bring your deal analysis, show that your numbers are conservative, and consider offering additional protection — a higher interest rate, a personal guarantee, or a lower LTV. Some new investors bring a more experienced partner or mentor to the table for credibility.
According to the Federal Reserve's guidance on lending practices, all lenders — including private ones — benefit from evaluating the borrower's history and capacity, even in asset-based lending where the property is the primary collateral.
Relationships matter. Private lending is a relationship business. Your first deal with a lender is the hardest to get funded. After you repay on time once, the second deal is dramatically easier. After the third, most private lenders start seeking you out.
5. Title and Lien Status
No private lender will fund a property with a clouded title. Before they cut a check, they need confidence that:
- The seller has clear ownership and the legal right to sell
- There are no undisclosed liens, judgments, or encumbrances
- Property taxes are current (or the lender knows the exact delinquent amount and it is accounted for in the deal)
- There are no pending legal actions against the property
A clean title search — typically ordered through a title company — is a requirement, not an option. According to Nolo's property law resources, title defects are one of the most common reasons real estate transactions fail, and private lenders will not accept the risk of funding into a title mess.
If the property has liens, that does not necessarily kill the deal. But the liens need to be disclosed, quantified, and accounted for in the closing math. A $15,000 mechanic's lien that the lender does not know about will destroy the relationship forever.
The One-Page Deal Summary That Gets Deals Funded
Private lenders are busy. Many of them review dozens of deal pitches per week. The ones that get funded are the ones that present clearly.
Create a one-page summary for every deal you pitch:
| Field | Data |
|---|---|
| Property address | Full address including zip |
| As-is value | Based on comps |
| Purchase price | Your contract price |
| Rehab budget | Line-item total |
| ARV (post-rehab) | Based on comps |
| Loan request | Dollar amount |
| LTV (as-is) | % |
| Exit strategy | Flip / rent+refi / assign |
| Timeline | Months to completion |
| Comparable sales | 3-5 recent closed comps |
Attach the comp analysis. Attach the rehab scope. Attach proof of contract (redacted if needed). Make it easy for the lender to say yes.
When Private Lending Is Not the Answer
Private lending works for deals where financing speed provides a competitive advantage. But it is not the only path — and in some situations, it adds unnecessary cost.
When the seller needs maximum speed and certainty: Even a fast private loan takes 5-10 days to fund. For sellers facing foreclosure deadlines, probate timelines, or life situations that demand a close in under a week, the financing step is a bottleneck.
When title issues or legal complexity exists: Private lenders do not fund clouded titles. If the property has unresolved liens, ownership disputes, or code enforcement issues, the deal may need a buyer who can close with cash and absorb those risks directly.
That is where institutional cash buyers like Home Pros operate. No lender approval. No underwriting gatekeeping. Cash in the seller's hands in 7-14 days. For hedge fund and institutional buyers' criteria, see our guide on what hedge funds look for in SFR acquisitions.
Frequently Asked Questions
What do private lenders look for when evaluating a wholesale deal?
Five things: (1) as-is property value and LTV ratio, (2) ARV and a detailed rehab plan, (3) a clear exit strategy with realistic timeline, (4) the borrower's track record of closing deals, and (5) clean title with no undisclosed liens. The deal needs to work on paper before the lender will fund it.
What LTV do private lenders offer on off-market real estate purchases?
Typically 65-75% of as-is property value. Some lenders go higher for experienced borrowers with strong track records. First-time borrowers with a private lender should expect 65-70% LTV.
Do private lenders require a personal guarantee on real estate loans?
Many do, especially on first deals or higher-LTV loans. A personal guarantee means the borrower is personally liable if the property's sale does not cover the loan balance. Some experienced borrowers negotiate non-recourse terms, but that requires a track record and strong deal fundamentals.
What is the difference between a private lender and a hard money lender?
A hard money lender is a company or fund with standardized terms and a formal application process. A private lender is an individual (or small group) who lends their own capital with negotiated terms. Hard money is more process-driven; private lending is more relationship-driven. Both are asset-based and fast.
How do I build a track record that convinces private lenders to fund my deals?
Start with small deals that you can fund yourself or with hard money. Close them successfully and document everything. After 3-5 completed transactions, approach private lenders with your deal sheet. Consistent repayment history, conservative underwriting, and professional deal presentations are what build trust.
Tired of waiting on lender approvals? Join the Home Pros Marketplace — bring your deals to institutional cash buyers who close without financing contingencies.
Featured Image Alt Text: Real estate investor presenting a one-page deal summary to a private lender at a meeting