Building Success: How Construction Due Diligence Can Secure Your Lending Portfolio

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In a recent insightful conversation on “The Lenders Playbook” podcast, hosted by Matt Rosen, Mike Kosmoski, Head of Construction at Lender Consulting Services (LCS), shared valuable insights into the critical role of construction due diligence in the private lending space. This conversation sheds light on why due diligence is not just a checkbox but a fundamental aspect of risk management and investment success.

The Journey from Construction to Consultation

Mike Kosmoski brings over two decades of experience from the construction industry into the financial world, demonstrating a unique blend of expertise beneficial for private lenders. Transitioning from construction to consultancy, Mike uses his extensive background to assist lenders in navigating the complexities of construction projects. His journey underlines the importance of understanding the nuances of construction within the lending process.

The Three Pillars of Lender Consulting Services

LCS stands out with its tripartite service model, catering to environmental, valuation, and construction due diligence. This comprehensive approach ensures lenders can mitigate risks effectively. The construction division, led by Mike, offers detailed property condition reports and draw monitoring, essential tools for lenders to stay informed and secure throughout the lending process.

Identifying the Ideal Client

The ideal clients for LCS are not just those checking boxes for compliance but those genuinely interested in leveraging LCS’s expertise to mitigate risks. The dialogue emphasizes the importance of lenders wanting more than just a report—they seek insights, recommendations, and a partnership that helps them make informed decisions.

Mitigating Risks and Reaping Benefits

LCS’s due diligence services offer a safety net for lenders, allowing them to understand and mitigate the inherent risks in construction projects. From detailed cost reviews before closing deals to ongoing draw inspections, LCS provides a data-backed, comprehensive analysis ensuring lenders can make decisions with confidence.

The Cautionary Tales: A Lesson in Vigilance

Mike shared a cautionary tale highlighting what can go wrong without proper due diligence—a lender ended up significantly overfunding a project due to lack of oversight, leading to substantial financial loss. This story serves as a potent reminder of the financial perils lenders face when skipping due diligence steps.

Adapting to Changing Landscapes

The conversation also touched on the evolving challenges in the construction and lending industries, especially post-COVID. Mike pointed out the increased default rates among general contractors and the subsequent impact on projects and lenders. This changing landscape underpins the necessity for expert guidance and thorough due diligence in current times.

Conclusion: A Call to Action for Private Lenders

This conversation with Mike Kosmoski is a clarion call for private money lenders to recognize the indispensable value of construction due diligence. In an era where risks are ever-present and evolving, engaging with firms like Lender Consulting Services is not just beneficial but essential. By adopting a meticulous approach to due diligence, lenders can protect their investments, ensure project success, and ultimately, secure their financial future.

For lenders looking to navigate the complexities of real estate investments confidently, reaching out to LCS for a comprehensive due diligence process is a prudent step forward. As the industry continues to evolve, having a seasoned expert like Mike Kosmoski and LCS on your side is invaluable.

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