When you apply for a fix-and-flip loan, your lender underwrites the property, and at the same time evaluates your experience and researches your personal or corporate liquidity. Here’s a radical idea, but one that makes sense in a turbulent lending market: Shouldn't investors perform the same kind of due diligence on their current or prospective lenders? In effect, underwrite the underwriter.
In the past year a number of private lenders have frozen their lending programs or closed them down entirely. Also, the high-profile regional bank failures are having a profound impact on community bank strategies, with many lenders rethinking their exposure to commercial and small balance loans. Just last month, one regional bank sold its entire fix-and-flip business. With this in mind, here are six questions you should be asking your current or prospective fix-and-flip lender:
- How committed are you to fix-and-flip lending? Not last year or the year before, but this year and over the next five years?
- What is your source of capital? Is it reliable? Is it from deposits, investors or the secondary market?
- Have you put your fix-and-flip programs on hold? Have you stopped writing certain kinds of loans?
- Have you tightened underwriting/credit criteria? Do you expect to?
- Do you have a maximum loan amount?
- What if my exit strategy hits a bump? What are my options?
Here's How Anchor Loans answer these questions:
- Anchor has been a leader in fix-and-flip and construction lending for more than 25 years, with total loan fundings of more than $13 billion. Last year we funded a record $1.9B, and our goal is to exceed that this year.
- We are a private non-bank, backed by Pretium Partners, a $52 billion investment firm focused on real estate. Our parent has a strong, long-term commitment to housing renovation.
- Construction and Fix-and-Flip lending is our lane, and we are not on hold. We have been a dependable source of capital and an active fix-and-flip lender since 1998, serving real estate investors through up cycles and down.
- To the contrary, we've increased LTC and offer up to 100% of construction costs for flips. We continue to focus more on building long-term client relationships vs. project by project transactions.
- While many of our competitors won’t lend more than $1 million on a project, we routinely finance projects up to $10million.
- Anchor is a lending partner focused on helping our customers succeed. We offer up to three 3-month discretionary extensions. (Subject to approval and fees.)
When you ask your lender these questions, take note of how they feel about you performing due diligence. If you are given the impression that you are not welcome to question their business practices, that is a definite red flag. A reputable, dependable fix-and-flip lender will understand and appreciate your inquiry.