Private lender underwriting criteria come down to two tests that both have to pass: does the project make money for the borrower, and is the borrower someone with a track record worth backing. Daniel Taylor, Managing Director at Lendyx, a Miami-based direct lender with over $800 million in closed transactions behind him, runs that two-part test on every file his shop funds. If a deal doesn’t clear a return for the borrower, his answer is simple: what’s the point.
The harder question right now isn’t rate. It’s value. After-repair values are coming back lower on recent appraisals nationwide, which is squeezing the refinance and resale exits that most fix-and-flip and BRRRR plans depend on. Taylor’s fix is a specific, repeatable stress test: underwrite to today’s market, then take a 5% haircut and push your refi rate up a quarter point.
Below: how the two-part test actually works, the arithmetic of the haircut, a real term-sheet-to-close timeline (roughly 25 days), and what makes a borrower easy to say yes to.
Key takeaways
- Every loan is judged on two things at once — the project and the borrower. A strong sponsor cannot rescue a deal with no margin, and a great deal will not carry a sponsor with no track record.
- ARVs are appraising lower nationwide. Taylor calls the gap between what buyers and sellers think a finished product is worth the single hardest problem his clients face today.
- Underwrite to today’s comps, then cut 5% off your ARV — and stress your refinance rate upward (a 6.75% DSCR quote underwritten at 7%). A 20% haircut sounds prudent but, in Taylor’s words, means you never do a deal.
- From signed term sheet to funding, budget about 25 days; two to four weeks is typical, with closing inside a week of the appraisal returning.
- Lendyx’s residential investor and developer loans run $500,000 to $7 million, and the firm reports roughly $200 million closed in under 12 months with no defaults, foreclosures or late payments.
From the Real Estate Pros Show
This article draws on an interview with Daniel Taylor of Lendyx on the Real Estate Pros Show, hosted by Scott Bursey.
The Two Things a Private Lender Is Actually Deciding
Strip away the rate sheet and a credit decision at a direct lender reduces to two questions that must both be answered yes. Taylor puts it plainly: “When we decide to fund the loan, there’s two criteria. There’s the project and there’s the borrower. They both need to align. They both need to be above board.”
On the project side, the test is not just whether the lender gets repaid. It’s whether the borrower makes money. “We want to know that they’re making a good return. We don’t want to do a deal where they’re not going to make any money — what’s the point?” That is a more useful screen than it sounds, because it means a deal with thin margin gets declined even when the loan-to-value looks fine. A borrower with no profit has no reason to finish the project.
On the borrower side: experience, demonstrated track record, and a relationship the lender can build on. Repeat business is the economic engine of a private lending shop, and a first file is evaluated partly as an audition for the next five.
Worth understanding: loan structures stay largely uniform regardless of where the property sits. Taylor is candid that his own investing experience in South Florida — where he knows every neighborhood and pocket after 34 years — does not transfer to a loan in California, where he doesn’t know one street from the next. Structure doesn’t flex by geography. What fills the gap is in-house analysts pulling comps and running data constantly. The underwriting box is the same in Charlotte as it is in Miami; the evidence supporting the value is what has to be built market by market.
Why After-Repair Values Are the Pinch Point Right Now
The hardest problem on lenders’ desks right now is not the cost of capital. It’s the appraised after-repair value. Taylor’s read, based on his firm’s tracking of recent appraisals: ARVs are coming back lower, and it’s showing up nationwide, not in one region.
The knock-on effect is a valuation standoff. “It makes it difficult to have sellers and buyers come together on an agreed value,” he says. Real estate value is ambiguous by nature — it’s whatever the comps say, or whatever someone will pay — and when the trend line on finished-product appraisals is drifting down, the two sides of a purchase negotiation are pricing off different vintages of data.
For a borrower, the consequence is concrete and it lands at the back end of the project, not the front. Your entire plan — refinance into a DSCR loan, or sell to a retail buyer — rests on a number an appraiser will produce twelve months from now. Taylor frames the requirement as needing enough “meat on the bone” for a refinance or an exit sale. If the ARV comes in 5% under your model, the refi proceeds shrink, and you either bring cash to the closing table or you don’t close.
The practical implication: an ARV in your spreadsheet is an assumption, not an input. Treat it the way you would treat a rehab budget from a contractor you’ve never used — with a contingency built in before you sign anything.
Underwrite to what is in the market today, then take a 5% haircut. Maybe even more. I’m sure a lot of old school guys would say take a 20% haircut — fine, great, then you’re never going to do a deal.
— Daniel Taylor, Managing Director, Lendyx
The 5% Haircut: How to Underwrite a Deal That Still Clears
Here is the specific test. Underwrite to what the market supports today. Then cut 5% off it. Maybe more. If the deal still works after the cut, you’re in reasonable shape.
Taylor’s framing matters as much as the number, because he explicitly rejects the more conservative version: “I’m sure a lot of old school guys would say take a 20% haircut. Which, fine, great — then you’re never going to do a deal.” A 20% cushion on today’s values does not describe a deal that exists in most markets. You’ll spend months hunting it and buy nothing.
The full stress test he describes has three parts:
- Comps as of today, not projected. Underwrite to today’s exits, not to where you think values go after the next rate cut.
- A 5% haircut on that value. The deal has to still clear its return threshold at the reduced number.
- A stressed refinance rate. His example: if a DSCR refinance prices at 6.75% today, run your model at 7%. He points to those loans specifically as one of the biggest risks in a deal because the rate is volatile between the day you buy and the day you refinance.
That last step is the one most borrowers skip. Debt-service coverage on the takeout is what determines how much of your capital comes back out, and a quarter point of movement changes the proceeds. Running the exit at a rate you have not been quoted is cheap insurance.
This is a way to structure your own analysis, not financial advice. Your thresholds should reflect your cost of capital and your market’s velocity.
Speed as an Underwriting Feature: Term Sheet to Close
Certainty of execution is part of the product, not a nice-to-have. Taylor’s reasoning is drawn from his own development deals: when you have $200,000 hard on a contract and a five-to-seven-day closing window, a lender who misses is not a service failure — it’s a total loss of your deposit.
The Lendyx process runs like this:
- Sizing and term sheet, 15–20 seconds. Proprietary software takes the data points while the originator is still on the phone with the borrower, then pushes the term sheet to the borrower’s cell and email for signature on the spot.
- Origination kickoff. Loan application, then due diligence collection — entity documents, operating agreements, bank statements.
- Appraisal ordered, underwriting begins. These run in parallel, not sequentially.
- Insurance and title. Kicked off as the appraisal comes back, with follow-up to hit closing requirements.
- Close within a week of the appraisal returning.
End to end, from signed term sheet to funding, 25 days is the average. Two to four weeks is the typical range. Note that the clock Taylor measures starts at term sheet, not at first contact — lead to term sheet can be two days or two months depending on whether the borrower has a live deal.
What this means for you as a borrower: the appraisal is the long pole. Everything before it is document collection you control, and everything after it is a week. If you want to compress a private money loan timeline, have your entity docs, bank statements and insurance contact ready the day you sign the term sheet.
What Disciplined Lending Looks Like From the Inside
Taylor’s blunt assessment of the current market: “We see a lot of not good deals getting done.” He attributes it to froth and to humans making irrational decisions when sentiment is running hot — a normal feature of markets like this one, in his view.
His shop’s counter-position is loan quality over volume. The stated performance: roughly $200 million closed in under 12 months with no defaults, no foreclosures, no late payments, draws funded on time, and a high average FICO across the book. He expects to write fewer loans than competitors chasing volume and considers that the responsible way to operate in this market.
The competitive picture explains why. From 2024 into 2026 there has been a flood of new lenders and new brokers relative to 2020 and 2021, and Taylor sees a lot of them “chasing the rate or chasing the yield to the bottom.” His objection is structural rather than territorial: “All the different pieces involved of these deals need to profit. Otherwise there’s no incentive to do the loan. And it needs to be a profit that makes sense.”
Two numbers frame the business. Loan sizes for residential investors and developers run $500,000 to $7 million, funded in-house. And the longer-term goal — a securitization, which delivers the most aggressive pricing available — requires roughly $250 million in committed loans to structure. That is the arithmetic behind why a disciplined lender wants repeat borrowers with clean payment histories more than it wants your one-off deal at a shaved rate.
How to Be the Borrower a Direct Lender Wants
Everything above points at a short list of things you control.
- Bring a track record you can document. Not a story about deals you’ve done — addresses, scopes, exits, timelines. Experience is half the credit decision.
- Bring a deal that pays you. Show the lender your return, not just their LTV. A file where the sponsor makes nothing gets declined on principle.
- Show up as a repeat client. Private lenders build books, and a borrower who plans to come back four more times is priced and processed differently than a one-off.
- Use the lender as a sounding board. Taylor describes brainstorming and thinking through deals with clients as a core value add in a volatile market. A lender who has funded hundreds of similar projects has seen your mistake before.
It also helps to understand what shapes a lender’s behavior on your file. Taylor and his partner build and hold their own projects — long-term rentals, short-term rentals, ground-up construction including a $10 million single-family build. That means they’ve personally waited on a draw, had subcontractors walk off a job, filed notices of commencement and chased lien waivers. A lender who has lived those pain points behaves differently when your draw request hits.
One last thing he’d tell his younger self: learn to control the emotion of a deal. Winning, losing, executing — the emotional swing is what produces irrational decisions, on both sides of the table. In a market where good deals are scarce and everyone is stretching, that discipline is worth more than a quarter point on your rate.
Frequently asked questions
How much of a cushion should I build into my underwriting if ARVs are coming in low?
Taylor’s rule is to underwrite to today’s comps and then take a 5% haircut off that value, possibly more depending on the deal. If the project still hits your return at the reduced number, you have a reasonable margin of safety.
He specifically pushes back on the 20% cushion some conservative operators use, arguing that at that level you will almost never find a deal that pencils. Pair the haircut with a stressed refinance rate rather than stacking a larger haircut on top of an unrealistic one.
How long does it take to close a private money loan from term sheet to funding?
About 25 days on average at Lendyx, with two to four weeks being the typical range. That clock starts when the term sheet is signed, not at first contact.
The sequence is term sheet, loan application, due diligence collection (entity docs, bank statements), appraisal ordered and underwriting started, then insurance and title. Closing happens within roughly a week of the appraisal coming back, which makes the appraisal the main variable in your timeline.
What loan sizes do direct private lenders like this typically fund?
Lendyx funds residential investor and developer loans from $500,000 to about $7 million, held in-house. Its focus markets are the top 50 CBDs plus South Florida.
That band is common for direct private lenders sitting between small local hard money shops and institutional bridge desks. If your deal is well below the floor, you are usually looking at a different type of lender entirely.
Does a private lender care more about the deal or the borrower?
Both, and Taylor is explicit that they are separate tests that must each pass independently. The project has to produce a real return for the borrower, and the borrower has to have experience, a track record, and be someone the lender can build a relationship with.
Practically, that means a strong sponsor cannot carry a deal with no margin, and a great deal will not get funded for someone with nothing to point to. Bring evidence on both fronts.
Why are there so many new private lenders competing on rate, and is a lower rate always better?
From 2024 into 2026 there has been a significant influx of new lenders and brokers compared with 2020 and 2021, and many are competing by chasing rate or yield downward. Taylor considers that unhealthy.
His reasoning is that every party in a transaction needs a profit that makes sense, or there is no incentive to do the loan in the first place. A quoted rate you can’t actually close on is worth less than a slightly higher rate from a lender who funds on the day they said they would — particularly when you have a hard deposit at risk.
The bottom line
Before you sign your next purchase contract, rerun the deal at 95% of today’s ARV with the refinance rate a quarter point above what you’ve been quoted. If it still clears your return, you have a deal worth funding. If it doesn’t, you found that out for free.
