Conduit Capital | Real Estate Investing & Private Lending
A good real estate deal isn’t just about finding the right property. It’s about creating a financing structure that works for everyone involved.
Borrowers need enough capital to complete their projects profitably, while lenders need reasonable terms that help protect their investments.
The best deals aren’t just funded. They’re structured for success.
Here are five things both borrowers and lenders should consider.
1. Make Sure the Numbers Work
Before financing a property, understand the full investment.
For example:
|
Project Expense |
Amount |
|---|---|
|
Purchase Price |
$80,000 |
|
Renovation Budget |
$50,000 |
|
Holding & Financing Costs |
$15,000 |
|
Total Investment |
$145,000 |
|
After Repair Value (ARV) |
$200,000 |
The potential looks promising, but unexpected repairs, selling costs, and market changes can quickly reduce profits.
For borrowers: Leave room for unexpected expenses.
For lenders: Evaluate the property’s value, project budget, and borrower’s ability to complete the project.
2. Understand the Loan Structure
Two important factors in real estate financing are:
Loan-to-Value (LTV): The loan amount compared to the property’s value.
Loan-to-Cost (LTC): The loan amount compared to the total project cost.
These measurements help lenders evaluate risk and borrowers understand how much capital they’ll need to contribute.
A well-structured loan balances the borrower’s financing needs with the lender’s collateral protection.
3. Set Realistic Timelines
A renovation expected to take three months can easily turn into six.
Permits, contractor delays, unexpected repairs, and market conditions can all affect completion dates.
Borrowers should build extra time into their plans and understand the costs of loan extensions.
Lenders should ensure loan terms align with the project’s scope and realistic completion timeline.
A little preparation upfront can prevent expensive problems later.
4. Have a Clear Exit Strategy
How will the loan be repaid?
Most real estate investors rely on two primary strategies:
- Sell: Renovate the property and repay the loan from the sale proceeds.
- Refinance: Convert short-term financing into long-term financing once the property is stabilized.
Both strategies come with risks.
A property might take longer to sell, or refinancing may not be available under the expected terms.
Always have a Plan B before you need one.
5. Build the Deal Around Transparency
Successful lending relationships depend on clear expectations.
Both parties should understand the interest rate, loan term, fees, payment requirements, construction draws, and collateral.
Borrowers should communicate project updates and potential delays.
Lenders should clearly explain their requirements and financing terms.
Good communication doesn’t eliminate risk, but it helps everyone make better decisions.
The Bottom Line
A successful real estate transaction should create an opportunity for the borrower while providing the lender with an appropriate structure for managing risk.
The borrower needs a profitable project and a realistic repayment plan.
The lender needs sound underwriting, sufficient collateral, and clearly defined terms.
When both sides understand the numbers, the risks, and the expectations, everyone is better positioned for success.
Disclaimer: For educational purposes only. Financing is subject to underwriting and approval. Real estate investing and private lending involve financial risks.
