Analyzing Borrowers: Why the Person Behind the Deal Matters

“As I grow older, I pay less attention to what men say. I just watch what they do.”
– Andrew Carnegie

 

Private lending is often described as asset-based—and while the property matters, seasoned lenders know the borrower is just as important as the collateral. A good deal with the wrong person can quickly turn into a bad deal. See below for a list of items to be on the lookout when you’re considering investing with a new borrower.

 

1. Experience Tells a Story

Has the borrower successfully completed the type of deal they’re pitching? If it’s a fix-and-flip, do they have a track record of rehabs? If it’s rentals, do they understand property management? Experience doesn’t have to be decades long—but if they’re new, they need a clear plan and a strong team.

2. References & Reputation

There’s no “Yelp” for real estate investors, so you’ll need to do your own digging. Ask for references from past lenders, partners, or industry professionals. A borrower who’s earned repeat capital from private lenders is often a safe bet. Also look for signs of professionalism—accolades, reviews, or verifiable track records.

 

3. Business Model Alignment

Every investor operates differently—single-family flips, rentals, multi-family, commercial, tax liens, and more. Make sure their business model lines up with your risk tolerance and financial goals. A clear, focused model is usually a better sign than someone chasing too many shiny objects.

 

4. Credit, Capacity & Capital

Even in asset-based lending, a borrower’s financial habits matter:

• Credit gives insight into how they handle debt.
• Capacity (cash flow, current projects, repayment history) shows their ability to repay.
• Capital (skin in the game) proves they’re invested in the deal’s success.

 

5. Collateral & Conditions

Yes, the property still matters—it’s your fallback if repayment fails. Make sure it has strong equity and the paperwork protects your position. Also, consider the conditions—economic, market, and even political trends can affect performance.

 

6. Character Counts

At the end of the day, you want to lend to people you trust. Reputation, integrity, and even how they show up in conversation (and online) matter. First impressions count, but remember the golden rule: trust, but verify.

 

7. Building Your Borrower Network

Where do you find quality borrowers? Start locally:

• REIAs & networking events – meet active investors in your area.
• Industry professionals – Realtors, contractors, title companies, accountants, and attorneys often know who’s credible.
• Other lenders – swap notes, share referrals, and build relationships.

The more intentional you are about your network, the stronger your borrower pool becomes.

Key Takeaway

A solid property is important—but the borrower behind the deal determines whether things go smoothly or spiral into problems. As a private lender, don’t just evaluate the asset—evaluate the operator.

With a consistent borrower vetting process, you’ll protect your capital, avoid unnecessary headaches, and build long-term partnerships with trustworthy investors.

 

👉 Btw, this blog post was created as a summary of one of the chapters in my book, The Private Lender Playbook. If you’d like to go deeper into analyzing borrowers—and many other aspects of private lending—you can grab a copy and dig in further.

👉 Or, if you’re curious how we apply these principles in practice, connect with us at Houston Capital Group

 

All the best,
Brant Phillips