My Hard ‘No’ List – 14 Red Flags I Won’t Ignore in Private Lending

What Are “Hard No’s”?

Today, I want to talk about something I call “hard no’s”—things I absolutely won’t tolerate in a deal. When lending out private capital, there are red flags that signal serious risk. Since 2022, I’ve been lending full-time. I’m not a grizzled veteran with thousands of deals under my belt, but I’ve seen enough to recognize blatant red flags that instantly kill a deal.

I break these into three categories:

• Triple Red Flags: Immediate hard no.
• Double Red Flags: Still a no, but maybe there’s more to dig into.
• Single Red Flags: Worth a closer look, but probably still a no.
  

Let’s walk through these so you can avoid the same headaches and heartaches I’ve had to learn from.

Triple Red Flags (Immediate Hard No)

1. Insufficient or No Collateral

This one should be obvious. If there’s no collateral or the LTV is over 75–80%, it’s a no. Plain and simple.

When I first started lending, I was doing deals at 100%, even 110–120% LTV. I thought that offering high leverage would keep people from walking away. Truth is—they will walk away if you don’t offer it. And that’s okay!

I’d rather do no deal than a bad deal. If you feel like you have to say yes to every opportunity, that’s what I call “small pipeline syndrome.” You don’t have enough deal flow to be selective. You must be able to say no.

I’d rather do no deal than a bad deal.

So again: No collateral, high LTV? Hard no.

2. Owner-Occupied Properties

As a private lender, you legally cannot lend on owner-occupied properties unless you’re licensed—and even then, I wouldn’t recommend it.

These properties trigger consumer lending regulations like TILA and RESPA, which complicate everything, especially foreclosure proceedings. Investment properties? Totally different story.

Even worse, some borrowers lie. They say it’s an investment, but then move in. One trick I use? Look at their current address. If the project home is way nicer than where they live now, guess what? They’re probably moving in.

So just remember: No. Owner. Occupied. Period.

3. No Business Entity

If a borrower doesn’t have an LLC and wants the loan in their personal name—no way.

We need to prove this is a business-purpose loan. Lending to an individual makes it look like a consumer loan, which could get you in legal trouble. Courts won’t side with you.

Yes, we’ll still get a personal guarantee behind the LLC, but the loan must be issued to a legal business entity. Check their articles of organization and operating agreement as well. If the LLC was formed just 30–45 days ago, that’s another red flag. Not always a deal-breaker—but close.

Check their articles of organization and operating agreement as well.

4. Poor Credit + Big Construction Budget

This combo almost always spells default.

Poor credit signals an inability to manage personal finances. If you can’t handle your money, why would I trust you with mine?

Sure, life happens—divorce, hardship, etc.—but poor credit and a huge reno budget rarely end well. For example, I once funded a project with a $170K reno budget. It worked—but the complexity was intense.

If someone’s asking for a massive rehab and they can’t show solid financial behavior? No deal. However, small budgets—say $20K–$40K for light cosmetic updates—usually go much smoother.

Double Red Flags (High Risk, Needs More Info)

1. Negative Balance Sheet / No Skin in the Game

If someone has years of experience but still has no liquidity, something’s off.

They should be able to fund part of the project themselves. If they can’t, you have to ask: What’s been going wrong? Why haven’t they built up some reserves?

No skin in the game = no accountability. That’s a problem.

No skin in the game = no accountability.

2. First-Time Operators

I don’t want to be your tuition. I don’t want to be your first mistake.

Some might say, “Well, if everyone said that, no one would ever get started.” And that’s fair. But it won’t be me taking that chance—not with my capital and especially not with my investors’ money.

Someone else can give you your start. I have to protect what I’ve built.

3. Unusual Property Types or Conditions

There are lots of red flags here:

• Flood zones
• Mobile homes
• Rural properties under $100K
• Bowing foundations
  

Each of these brings complications with resale, insurance, and liquidity. And foundation issues? They’re often very expensive—think $10K–$50K+—and can derail a new investor fast.

I prefer standard single-family homes in proven neighborhoods. Clean, simple, profitable. No weird stuff.

I prefer standard single-family homes in proven neighborhoods. Clean, simple, profitable. No weird stuff.

4. Investing Outside of Proven Market

If you live in Idaho but want to flip in Florida, explain why. Do you have boots on the ground? A team in place? Experience in that market?

Being local matters. You understand ARVs, labor costs, even seasonal shifts.

Personally, I only lend in Idaho and surrounding areas. It’s what I know. I’ve flipped over 100 homes here and can tell you in seconds whether a deal pencils out. I expect the same from borrowers in their markets.

Otherwise? Hard no.

5. No Real Exit Strategy

Everyone says they’ll sell. But what if the market shifts?

“Then I’ll refi.” Okay, but your credit’s a mess and rates might be at 9%. That’s not a plan—that’s wishful thinking.

Or, they’ll say, “I’ll get a DSCR loan.” What if rents don’t support the required 1.2x coverage ratio?

You need to have multiple viable exits, not just a hope and a prayer. I don’t do long-term loans. Mine are short-term bridge loans. Renting for a few months may cover interest payments, but it won’t solve the bigger issue.

You need to have multiple viable exits, not just a hope and a prayer.

A strong plan includes timelines, contingencies, and realistic options. If you don’t have one? That’s a deal breaker.

Single Red Flags (Caution Lights & Gut Checks)

1. Urgent Funding Requests

If someone needs funding within 48 hours—or worse, same day—it’s a red flag. These kinds of rushed decisions make me pause. That said, I’ll add a caveat: sometimes a deal is truly too good to miss.

For example, a couple of months ago, someone called needing funding in under 24 hours. I said we could move quickly, assuming everything checked out—title, insurance, documents. But it turned out he was trying to buy at auction and had no idea how that worked.

He was getting a $250K property for $90K. On paper? Sounds great. But after digging deeper, there were too many unknowns, and he didn’t have title insurance ready. Instant red flag.

Now, if it’s an experienced borrower—someone who’s completed 10+ projects with us—then yes, we might expedite the process. But even then, all documents must be in place. Otherwise? I’m not moving forward under pressure.

2. Borrower Dictating Terms

If the borrower tries to dictate rates, points, fees, or payment structure, I walk.

I am the lender. That means I set the terms. If someone comes in demanding zero down, no payments, or trying to pressure for better terms—that’s not how we operate.

We’re very clear: 3 points, 14% interest. Done. I don’t deviate. That consistency keeps it simple. I don’t want to wonder if I told someone 2 and 12, or 4 and 14. Our terms are the same for everyone.

And while some might balk at our rates, they often come back. Every month, I get calls from people saying their cheaper lender fell through. Suddenly, 3 and 14 doesn’t seem so bad.

Plus, the actual cost difference over six months is often just a few thousand dollars. If $5K breaks your deal, you probably shouldn’t be doing the deal in the first place. Margins should allow for contingency—and if they don’t, I won’t fund it.

Margins should allow for contingency—and if they don’t, I won’t fund it.

3. Broker Daisy Chains & Mass Email Blasts

I don’t fund deals that come through a game of telephone between brokers. Nor will I respond to email blasts fishing for the cheapest and fastest lender.

We’re fine working with brokers. We’ll gladly pay a referral fee. But if it’s a daisy chain where I don’t speak directly to the borrower? That’s not happening.

Here’s how we operate: everyone gets on a call. Expectations are clearly laid out. If we’re aligned, great—we’ll move forward.

And no, I’m not trying to cut out brokers. If needed, send me a non-circumvent agreement—I’ll sign it. That’s just good business.

Burning bridges to save one point on a deal? That’s short-sighted. So let’s communicate clearly and directly, and make sure all parties are in sync.

4. Incomplete Track Record or Sloppy Documentation

Organization matters. While this isn’t an automatic deal-killer, a borrower with disorganized documents makes me hesitate.

Personally, I keep all my tax returns, entity docs, and financials fully organized and accessible. If you ask for something, I can get it to you in 30 seconds. I expect a similar level of preparedness from my borrowers.

Many times, I ask for two distinct items: articles of organization and operating agreement. You’d be surprised how many people don’t know the difference—or upload the same doc for both. That’s a concern.

If someone doesn’t understand their own entity structure, how are they managing a six-figure renovation? While not an automatic no, sloppiness here makes me nervous.

If someone doesn’t understand their own entity structure, how are they managing a six-figure renovation?

5. Cold DMs with Zero Effort

“Hey, are you a hard money lender?” Yes.
“Do you offer 100% financing?” No.
End of conversation.

This happens all the time. These lazy, transactional DMs are a huge red flag. You’re asking me for money—yet putting in no effort to build a relationship.

Yes, this is technically a business transaction. But I’m not just writing checks to strangers with zero context. If you want funding, we need to talk. Let’s hop on a call, build trust, and see if there’s a good long-term fit.

This isn’t a one-time deal for me. I’m looking for partners who value mutual success and sustained relationships. If you approach it like a fast food drive-thru, I’m out.

Final Thoughts & Wrap-Up

And there you have it—my full list of Triple, Double, and Single Red Flags.

These are the patterns and warning signs I’ve learned to watch for after dozens of loans. They’ve saved me from bad deals, wasted time, and serious stress. Some are immediate no-gos. Others just require a little more digging.

None of these are set in stone, but they act as a checklist to protect my capital—and my investors’ capital. Use them. Add to them. Adapt them to your style. That’s how we learn.

Use them. Add to them. Adapt them to your style. That’s how we learn.

Now, I want to hear from you. What’s on your list? What do you look for? Do you agree—or totally disagree?

Shoot me an email at podcast@joinlendr.com and let’s compare notes. Maybe we’ll do a follow-up episode with your insights.

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