Legal Information Notice: This checklist provides general educational information only. It is not legal advice, does not create an attorney-client relationship, and may not apply to your jurisdiction or circumstances. Laws and deadlines vary. Do not rely on this checklist for a specific legal decision or deadline; consult a qualified attorney licensed in the relevant jurisdiction.
- Fast funding can conceal expensive financing.
- Interest rate alone doesn’t reveal total borrowing cost.
- Points can materially increase effective cost.
- Origination fees may be substantial.
- Loan-to-value isn’t the only underwriting metric.
- The lender may value the property differently from you.
- A low purchase price doesn’t guarantee sufficient collateral.
- Interest-only payments can hide the eventual payoff obligation.
- Balloon payments can create refinancing risk.
- Short maturities create exit pressure.
- Extension options may cost extra.
- Default provisions can be severe.
- Prepayment penalties can reduce flexibility.
- Personal guarantees can put unrelated assets at risk.
- Cross-collateralization can expand the lender’s security.
- Construction draws may have conditions.
- Delays can increase carrying costs.
- Renovation assumptions can be overly optimistic.
- The lender’s appraisal isn’t necessarily your investment thesis.
- A successful purchase can still become a failed loan exit.
- Refinancing isn’t guaranteed.
- Market changes can destroy the expected exit.
- Legal/documentation fees can add significant cost.
- “No income verification” doesn’t mean “no risk.”
- The most important question is often how the loan gets paid off, not how it gets obtained.
Premium Checklist
MISSION: Determine whether the financing remains survivable if the investment takes longer, costs more, or sells for less than expected.
Financing
☐ I know the exact principal.
☐ I know the stated interest rate.
☐ I know the effective cost including points and fees.
☐ I know the loan maturity.
☐ I know whether payments are interest-only.
☐ I know the balloon amount.
Property
☐ I have independently evaluated the property.
☐ I have independently estimated after-repair value.
☐ I have created a conservative renovation budget.
☐ I have included contingency reserves.
☐ I have calculated carrying costs.
Exit
☐ I have identified the planned exit strategy.
☐ I have identified a backup exit strategy.
☐ I know what happens if the property doesn’t sell on schedule.
☐ I know what happens if refinancing isn’t available.
☐ I have calculated the investment’s break-even sale price.
Loan Contract
☐ I understand default provisions.
☐ I understand late fees.
☐ I understand extension costs.
☐ I understand prepayment penalties.
☐ I understand personal guarantees.
☐ I understand collateral requirements.
☐ I understand cross-default provisions.
Stress Test
Calculate:
Maximum survivable delay = available cash reserve ÷ monthly carrying cost
Then test:
☐ 3-month delay
☐ 6-month delay
☐ 12-month delay
☐ 20% renovation overrun
☐ 10% lower sale price
☐ Higher-than-expected refinancing cost
Final Question
“If my exit fails for 12 months, can I still survive this loan?”
If the answer is no, the financing may be controlling the investment rather than supporting it.
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