Real Estate Private Debt Term Sheet: What to Check
A real estate private debt term sheet is the summary of terms that sets out, before the final contract, how much is lent, against what collateral, at what cost and under which rules. Knowing how to read one helps you understand the real risk of a deal beyond the interest rate. This article is educational and is not investment advice.
What a term sheet is and why it matters
A term sheet is a short document that is usually not binding in full. It fixes the main terms so the parties can negotiate the loan agreement and security documents on a common basis.
For a private investor it is the quickest snapshot of a deal. It lets you compare opportunities with the same yardstick and spot what is missing. If a document does not make clear how repayment works, what is mortgaged or what happens on default, ask before going further.
Key terms: what to check in each section
There is no single template, but most term sheets for private debt secured on property include the points below.
| Term | What it means | What to check |
|---|---|---|
| Amount and maturity | Capital lent and repayment date | Whether the term fits the borrower’s exit plan |
| LTV | Loan divided by property value | Who values the asset, when and how |
| Rate and fees | Total cost to the borrower | Ordinary and default interest, arrangement and exit fees |
| Repayment | How the principal is repaid | Bullet or milestone-based, and what happens on an extension |
| Security | Mortgage, pledges, guarantees | Ranking of the mortgage, prior charges and land registry status |
| Covenants and early repayment events | Rules the borrower must follow | Which breaches allow the lender to call the loan early |
LTV and valuation
LTV (loan-to-value) measures how much is lent against the value of the collateral. What matters is where that value comes from. A recent, independent valuation carries more weight than a developer’s estimate.
Ranking of the security and prior charges
A first mortgage is not the same as a second one. In an enforcement, earlier debts are paid first. If the term sheet does not state the ranking or existing charges, that is a signal to ask for more information.
Borrower obligations and early repayment events
Reporting duties and financial ratios let the lender act before a problem grows. They are one of the clearest differences between a well-structured deal and a vague one.
Market reference points
As a guide, the “Observatorio de Financiación Alternativa con Colateral Hipotecario en España” (October 2026, with PwC market analysis and Cuatrecasas legal framework) reports these average terms for alternative real estate financing in Spain. They are market data, not Ondara Group terms or return targets.
| Term | Average | Observed range |
|---|---|---|
| LTV | 55% | 30% – 68% |
| Interest rate | 10% | 7% – 20% |
| Maturity | 28 months | 11 – 72 months |
The width of these ranges is the best reason to read each term sheet on its own merits. You can see the report on the PwC website. For more on the Spanish market, see alternative mortgage lending in Spain in 2026 and bridge-to-term real estate: legal keys.
Illustrative and hypothetical example: how much cushion does the collateral leave?
Suppose a EUR 1,000,000 loan at a 55% LTV. The property would be worth about EUR 1,818,182. If the borrower defaults, the claim could be the principal plus 12 months of interest at 10% and 6% recovery costs: EUR 1,160,000. The table compares that debt with the sale price if the property is sold at a discount.
| Discount to value | Sale price | Debt claimed | Coverage |
|---|---|---|---|
| 0% | EUR 1,818,182 | EUR 1,160,000 | 1.57 |
| 20% | EUR 1,454,545 | EUR 1,160,000 | 1.25 |
| 30% | EUR 1,272,727 | EUR 1,160,000 | 1.10 |
| 40% | EUR 1,090,909 | EUR 1,160,000 | 0.94 |
| 50% | EUR 909,091 | EUR 1,160,000 | 0.78 |
Coverage above 1 means the sale would repay the debt; below 1, there would be a loss. The example shows that collateral cushions risk but does not remove it: with a steep discount, coverage runs out. The assumptions are hypothetical and do not reflect any real transaction.
Trends: what is happening worldwide and in Spain
- Worldwide, September 2026: according to PitchBook LCD, reported by Alternative Credit Investor, European direct lending totals about EUR 7.4 billion across 31 deals in the period analysed, and average spreads have edged up. With more borrowers accepting higher pricing, reviewing cost and terms matters more.
- Spain, October 2026: the Banco de España (Spain’s central bank) bank lending survey points to stable criteria for companies, tighter conditions and weaker demand.
For a private investor the reading is cautious: costlier bank credit can raise demand for alternative financing, but also pressure on borrowers. The soundness of the terms matters more than deal volume.
Risks to consider
- Borrower default: there may be delays and partial or total loss of capital.
- Valuation: if the sale value is below the valuation, the collateral covers less.
- Illiquidity and term: capital is tied up and maturities can be extended.
- Enforcement: recovering the collateral requires legal proceedings that can be slow and costly.
- Incomplete information: a term sheet does not replace the final documentation or a legal review.
All investments carry risk, including partial or total loss of capital. Property collateral mitigates risk but does not eliminate it.
How Ondara Group works
Since 2018, Ondara Group has structured private debt transactions backed by real assets as collateral. We analyse each deal individually, seek diversification and keep direct contact with the management team. The minimum investment is EUR 25,000. Learn more on our who we are page.
Frequently asked questions
What is a term sheet in private debt?
It is the summary sheet of a deal’s main terms: amount, maturity, security, cost and obligations. It is the basis for the final contract.
Is it binding?
It depends on the document. It is usually binding only in specific clauses, such as confidentiality. Confirm with a legal adviser.
What LTV is typical?
According to the October 2026 Observatorio, the alternative market average is 55%, within a range of 30% to 68%. Every deal is different.
What should I ask before investing?
Who values the property, what the mortgage ranking is, what the exit plan is and what happens if there is a delay or default.
Does a low LTV guarantee getting my capital back?
No. It reduces risk, but sale price, costs and timing can mean recovering less than expected.
In summary
- A term sheet summarises a deal’s terms and lets you compare them with one yardstick.
- LTV, ranking of the security, the exit plan and borrower obligations matter, not just the rate.
- The market shows wide ranges: average LTV 55%, average rate 10% and average maturity 28 months, according to the Observatorio.
- Property collateral mitigates risk but does not eliminate it.
See how we analyse each deal
If you would like to know how we invest, register as an investor and we will explain how it works. The minimum investment is EUR 25,000.
This article is for information purposes only and does not constitute an investment recommendation or financial advice. All investments carry risks, including the possible loss of the capital invested, and past or target returns do not guarantee future returns. Analyse each opportunity with a professional before investing.
