Building a buy box: how capital partners define the loans they want

A buy box is a written set of criteria describing the loans a capital partner is willing to fund: the loan types, leverage, locations, sizes, borrower profile and documentation it needs. A clear buy box lets lenders send you only the loans that fit, lets you say yes or no quickly, and keeps your portfolio aligned with your strategy as it grows.

This guide walks through each part of a buy box for business-purpose real estate loans, how to set it, and how to avoid the common mistakes.

Why a buy box matters

Without written criteria, every loan becomes a fresh negotiation. Lenders guess what you want, you review deals you'll never fund, and decisions drift with whatever came in last.

A good buy box:

• Saves time for you and the lenders sending you loans.
• Speeds decisions, because most of the yes-or-no work is done before you see the file.
• Keeps the portfolio consistent, so risk doesn't creep up loan by loan.
• Makes you a better partner, because lenders can rely on you to fund what you say you'll fund.

The parts of a buy box

1. Loan types

Which strategies will you fund? Common categories:

• Bridge loans on existing properties
• Fix and flip or renovation loans
• Ground-up construction
• DSCR or rental loans (see DSCR loans explained)
• Small balance commercial: multifamily, mixed-use, retail or industrial

Each has a different risk profile, term and level of oversight. Construction, for example, needs draw management you're comfortable with (see construction draw management).

2. Lien position

Most capital partners funding private real estate loans require first lien. If you'll consider junior positions, say so explicitly and define the limits. Our guide to first vs. second lien explains why it matters.

3. Leverage

Set maximums for the ratios that matter for each loan type:

• Loan-to-value (LTV) for bridge and rental loans
• Loan-to-cost (LTC) for renovation and construction
• Loan-to-ARV for renovation and construction

Be clear about which value you rely on (as-is, as-repaired) and that it must come from an independent appraisal. See LTV vs. LTC vs. ARV.

4. Geography

List the states or metro areas you'll fund, and any you won't. Some partners prefer markets they know well; others want diversification. Consider:

• Foreclosure process: judicial or non-judicial states can differ in time and cost to resolve a default.
• Market liquidity: how easily the property could be sold.
• Local knowledge: yours and the originating lender's.

5. Loan size

Set a minimum and maximum. Too small, and the work per loan isn't worth it. Too large, and a single loan becomes a concentration risk. Many partners also set a maximum share of their capital in any one loan, borrower or market.

6. Property types

Single-family, 2–4 unit, condos, multifamily, mixed-use, commercial, land. Be specific about exclusions, such as land without entitlements, rural properties, or specialty uses.

7. Borrower profile

• Entity: business-purpose loans to LLCs or corporations, with personal guarantees if you require them.
• Experience: number of similar completed projects, especially for construction.
• Credit and background checks.
• Equity: the borrower's cash in the deal.

8. Term and pricing

• Term range and any extension options you'll accept.
• Target return, stated as a range rather than a single number, so lenders can price loans that fit. Remember that all lending involves risk, and returns are targets, not promises.
• Prepayment and minimum-interest terms you prefer.

9. Documentation

Define what a file must include before you'll review it: appraisal, title commitment, term sheet, insurance, borrower and entity documents, and, for construction, the budget and draw schedule. See what goes into a complete private loan file.

10. Servicing

Who will service the loan, how will you get payment and draw reports, and who makes decisions on extensions or defaults?

A sample buy box

Hypothetical example, for illustration only. Not a recommendation.

Criterion	Example setting
Loan types	Bridge, fix and flip; no ground-up construction
Lien position	First lien only
Max LTV (bridge)	70% of as-is value
Max LTC / loan-to-ARV (fix and flip)	85% LTC, 70% loan-to-ARV
Geography	Five named states; no rural properties
Loan size	$250,000 to $1,500,000
Concentration	No more than 15% of capital with one borrower
Property types	1–4 unit residential, small multifamily
Borrower	LLC with personal guarantee; at least 3 completed similar projects
Term	6–18 months; one extension allowed
Documentation	Full file, including independent appraisal and title commitment
Servicing	Third-party servicer with monthly reporting

Each setting in the table should be one you could explain to an investor or committee.

Setting your criteria

• Start from your strategy. What return are you targeting, how much risk can you take, how much time can you spend per loan, and how long can your capital stay out?
• Be specific. "Moderate leverage" means different things to different lenders. "Max 70% LTV on an independent as-is appraisal" doesn't.
• Separate hard limits from preferences. Mark which criteria are non-negotiable and which can flex for a strong loan.
• Start narrow, then widen. It's easier to add loan types and markets as you gain experience than to unwind a portfolio that grew too fast.
• Review regularly. Revisit the buy box as your portfolio, capital and the market change.

Common mistakes

• Too broad: you get flooded with deals you won't fund, and lenders stop sending the good ones.
• Too narrow: almost nothing fits, and your capital sits idle.
• Unwritten exceptions: a "one-off" exception that becomes a habit changes your portfolio's risk.
• Ignoring concentration: too much in one borrower, market or loan type.
• Leverage without definitions: a maximum LTV means little unless you define the value it's measured against.

Key takeaways

• A buy box is your written criteria for the loans you'll fund.
• Cover loan type, lien position, leverage, geography, size, property type, borrower, term, documentation and servicing.
• Be specific, separate hard limits from preferences, and review the criteria regularly.
• A clear buy box gets you better-matched loans and faster decisions.

How Lender Capital fits

When you join Lender Capital, you set your buy box once. We review every loan before it's placed and send you only first-lien, business-purpose loans that fit your criteria. Each comes with the full file, you decide whether to fund it, and you fund and hold the whole loan directly. Capital partners pay no fees.

See how it works for capital partners, or request access.