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The real estate investing experience is crucial, especially to someone you don't know or you're not familiar with. You want to see a track record of a certain type of investing that you're comfortable lending to or lending on. While past performance can be a pretty good indicator, it is no guarantee of future success. When you're taking a loan application or if you are insisting that someone fills out a loan application, the first question to ask yourself is should you require an application of any borrower? The second question is if you do require an application, what information should you ask for? Learn the answers here so you can protect yourself and mitigate the risks.
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Should You Require An Application From Your Borrower And What Info To Require
I'll be discussing whether you should require a loan application or not and what type of information would be beneficial or is the most important on a loan application. Before we get into the heart of that matter, I'd like to thank you for sharing your most valuable asset with me and that is your time. Time is the one thing that both the rich and the poor have in common. Everyone gets 24 hours in a day, no more, no less. The man who sleeps on the street has the exact same amount of time as the man who sleeps in an ivory tower. How you spend your time makes a huge difference in life and I'm grateful that you're spending your time with me.

I'd like to pose two questions to you. The first question is, do you require an application or would you require an application of any borrower? When I loan to people like Chris Funk, my partner, Landon, or Ray Sasser, I'm in the industry enough with them that I don't require an application. Maybe I should. I do require proof of identification though. However, I don't always necessarily want or need to take an application from an investor like that. However, if I don't know you, you don't have a track record or at least a track record, I'm not going to loan to you. If I'm not familiar with you, if it's a new joint venture or a new investment, I will require an application from that borrower so that I can get some background and it helps me underwrite the loan. That first question is do you require it? It's going to be up to you. Everyone fills out the same form. I have all that information. If you're comfortable with somebody, you may not need that application. I would suggest you verify that they have the funds to pay you back and the reserves to be able to afford the loan. The actual formal application you might not want to use, it's up to you. It's going to be a judgment call. In full disclosure, I don't always require an application, but it's a good practice. Repeat loans to the same borrower, that's going to be your call depending on your comfort level with that borrower.



Then the second question, if you do require an application, what information do you ask for or should you ask for? This is where things can get a little hairy and personal. The deeper you go into somebody's background, the better protected you are. However, the beauty of going to a private lender is not having to get the financial autopsy that the banks like to perform and some hard money lenders like to do. You want to protect yourself if you want to mitigate the risks. You also don't want to make it so incredibly difficult for the borrower that they might as well pay a few more interest rate points or points on the loan to get the hard money without the hassle. I'm going to go over a few things with you that I like to require and that is first off, the investor's name. All that good stuff, contact information, home phone, cell phone, work number, email addresses and the address that they live at. If they have a business address or if they're borrowing in the name of a company, I want to know all that information,