The low LTV approach is very safe compared to that taken by conventional lenders who routinely lend 80-95% LTV, often leaving no wiggle room should the borrower default on making the payments. This is part of the reason banks are struggling right now.
You, as a private lender, will never lend more than 70% LTV which is a very conservative number aimed at providing a cushion to work under. As a lender, it is in your best interest to minimize risk and maximize return and this is why a loan should never be made without a 25% safety net. We don’t violate this rule, because your security is at stake.
Determine the value – Typically the value is determined with comparable sales, DOM (days on market) and now how many in the area our foreclosures. A BPO (Broker Price Opinion) may be ordered over an appraisal because it’s cheaper and faster. It never hurts to get a second opinion.
If you would like more information along with some free tools to help you get started raising private money head over to www.investorsclassifieds.com/private-money