This is meant to be a quick introduction to how we here at AlphaFlow think about underwriting loans and how we invest. As part of our process, we look at 50+ factors when analyzing each loan. Our stringent underwriting process causes us to reject over 90% of the loans we look at. We also look at how that loan fits into the wider AlphaFlow portfolio, making sure we’re keeping our geographic exposures diversified.
At its core, our underwriting process looks at how likely we think the borrower is to repay, and more importantly, how attractive is the property as an asset. We break out our underwriting into three components: evaluating the borrower, the property, and the market the property is in. We’ll take a quick look at each category and a few of the factors we look at:
Each of these factors helps to build a larger story about the loan, and combined with a larger market comparison analysis and loan terms gives us a more full picture about the desirability of the loan as an investment, and how attractive the exit strategy for the property will likely be (be it a sale, refi, or rental). The exit strategy is particularly important in case the originator or loan owner needs to foreclose on the property, and represents the best chance for an investor to get their principal back. As such, it plays a major portion in our evaluation of any loan.