Underwriting Basics: Harness Your Inner Real Estate Investor
Are you striving to become an accomplished real estate investor? Then understanding the basics of underwriting is a building block that you cannot afford to skip. Every Ignite Funding Trust Deed investment begins with the underwriting of the loan and property. Our process follows the framework of many of the same questions you may have asked, such as: B. which regions we come from and why, how we find and check borrowers and how we qualify a property. So let’s get started!
Where do we lend and why?
We tend to borrow and service loans in the Southwest. These are specific regions that continue to have positive market drivers and are title theory states. Market drivers include current employment growth and long-term projected employment growth, the region’s affordability and desirability, and supply and demand. Title theory states enable a faster standard resolution by avoiding an often more expensive and slower legal process.
How do we find borrowers?
It’s actually the other way around, borrowers find us. We fill the void for developers who are too big for traditional financing from small local banks and too small for national banks. Most borrowers have worked with us in the past or heard about us through other borrowers. Borrowing and servicing in the same region for over a decade has resulted in strong borrower relationships and a respected reputation in the lending industry.
We work with borrowers in various niche markets such as apartment buildings, luxury real estate, master plan communities, land banking, distressed retail stores, healthcare facilities, home remodeling and more. This is because we try to think like a developer and not detract from our ability to borrow on a one-size-fits-all approach. This access to diversification between different borrowers and assets is an important part of a strong, long-term underwriting and risk mitigation strategy.
How do we screen borrowers and qualify the property for consideration?
We qualify all borrowers and the property in question with the three Cs of lending: credit score, capacity and collateral. Your credit score shows the current and past experiences of borrowers if it includes foreclosures, bankruptcies, mortgages, or judgments against them personally and as a company. In capacity, we measure the borrower’s ability to repay the debt by analyzing how much debt they owe to equity. We ensure that taking on additional debt does not jeopardize their ability to continue paying their bills.
The collateral is the most important element of a loan, which is why we are examining four main components of the project.
- Is It Legal? We are working with the local communities to verify that the zoning desired by the borrower for the project is acceptable to the planning committee. If there is any difficulty it will increase the risk of the project and we will choose not to fund the loan.
- Is it physically possible? We look at the dimensions of the project and the asset in relation to the way the land is configured to ensure that it is physically feasible.
- Is it Financially Feasible? Here we want to see how much projected income the project will generate for the borrower. The profit reduces the likelihood that a borrower will leave a project and stop paying their bills.
- Is it maximally productive? We check whether the project and the intended asset are the best fit for the location.
Want to learn more about real estate investing with Ignite Funding? Call us at 702-761-0000 or send the word “Investments” to 844-552-7022 to arrange a 15-minute no-obligation consultation today!
Ignite Funding, LLC | 2140 E Pebble Road, Suite 160, Las Vegas, NV 89123 | P 702.739.9053 | T 877.739.9094 | F 702.922.6700 | NVMBL # 311 | AZ CMB-0932150 | Money invested through a mortgage broker is guaranteed not to earn interest and is not insured. Corresponding disclosure documents must be presented to investors prior to investment.
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