The Dirty Truth about Gap Funding!


What is Gap Funding?

It’s a term that’s used very loosely.

To some, it may mean that they are looking for additional capital to “gap” a loan. However because this is such a rare occasion, most have no idea what this means.

First of all, when people seek gap funding, they don’t realize that they are alerting the lending community that they are not liquid enough to do their deal. This is already a red-flag!

Who gets Gap funding?

Gap funding, when used in the sense that I referenced above is reserved for operators and investors with prior experience flipping properties. This means that lenders want to see that you were on the HUD or Settlement statement, not just participated on the deal.. this means you have to prove your exits.

Also this experience has to have taken place within the past 1-3 years. They want you to have current knowledge of the challenges of fix and flipping before they trust you with a no-money-down transaction.

They also want to see that you have “reserves”.

This means that once they make the 100% loan to you, which includes their expensive gap capital contribution, they want to see you how you will make those payments!

If you expect them to cover all of the rehab, construction, holding costs and selling costs, the deal has to have lots of REAL potential after remodel value, prove this by having supporting comparables.

The subject will have to be in the best areas, and you need to know your rehab budget, and get it confirmed by a contractor and his proposed team. Get each trade’s bid verified if you must. This will allow you to prove the feasibility of the project. The lenders actually want to know what materials, how much labor, hours needed to complete the deal, etc.,

Gap Funding behind another Lender?

This is the usual request, a prospective client goes and gets a 1st loan quote with a “gap” that they need to find somewhere.. anywhere ! Many times the down payment is not sourced and doesn’t need to be seasoned.

The general answer is NO.

  • No because the lenders don’t know each other.
  • No because the lenders don’t know you.
  • No because I don’t know you.

Real estate is a relationship business, and a joint venture (which is what you’re proposing) is akin to a marriage, and it takes a bit of dating, and lots of trust to create that environment.

In a short answer, forget about it.

Do you have recent experience? And you need gap funding? Why?

Lenders wonder if you have a problem managing money, managing your team, managing the rehab process, or who knows right?

They ask themselves if you have recent experience why would you need gap funding.

You should be prepared with answer and Letter of Explanation to calm these concerns.

A.R.V Lending

ARV = After Repaired Value

In cases when you find an awesome opportunity, some lenders will use a formula – they add acquisition cost, plus the rehab cost, plus the closing costs, and then divide that number by the expected retail price, it gives a number, that percentage is your % of ARV, generally they max this out t 75%.

Example = $650,000 purchase price + $100,000 rehab, 8-9% closing costs = $117,000 = $867,000. Divide that by the expected retail price of $1,300,000 = 66% of ARV.

If you landed that deal above, an ARV, asset-based lender may be interested in working with you, provided you have experience with this level of flip.

That brings me to another point. If you have history of flipping $100,000 homes, but suddenly want to flip a $1,000,000 home, you may meet some resistance. Not only does the expectations grow larger, but the LTV’s get smaller, which means that down payments go up, you may then have to bring in 10%.

Alternative Funding to Gap your deals

My advice is that you consider the following alternative funding methods we’ve used to help investors get deals done.

In order to get funding, you have to be coming from a position of strength. This means you should have good credit, in this case I mean 700 fico scores. If you have a business with revenue even better, having assets that can be leveraged and possibly earning income sweetens the deal!

Unsecured Personal Funding

This can come in the form of credit cards, credit lines, from a variety of sources. These have different terms including 0% interest for an intro rate to induce you to use the credit, or 8,10, or 18%+ right off the bat. You can stack this funding up and settle around $250k, which is probably 6-7 different tradelines, with major banks like B of A, Chase, PNC, Barclays, Navy Fed, Penn Fed, Discover, PayPal, and many others. Of course, every tradeline will suffer you an inquiry, of course, this fall off or can be removed for a fee.

Business Term Loans

The business term loans are also for 700+ fico scores across the board, you will need to claim $50,000 in personal taxes, if you qualify – the rates are around 6%-9% depending on your credit profile. The term is 5-7 years. We can raise up to $500,000.

Cross Collateralization

If you have existing assets in your portfolio, these can be residential or commercial, they should have some equity, perfect if they are long-term holds. You can add extra leverage to your purchase by allowing the lender to place a lien on additional assets. This compels the lender to move forward with the loan because you’ve reduced the risk and shown good faith.

Revenue Loans

If you have a business and you earn income, you may be able to leverage that and get a lump sum that you can use for gap funding your deal.

Friends, Family and OPM

This is the hardest source of capital to get, but it would likely be a better choice than shopping for a 2nd lien, often they won’t require so much paperwork, and probably won’t require a 50/50 split, saving you a bunch on the back-end.

Creative Financing

Today we need to be fully educated and aware of the many alternative funding options available, or know someone that is!

Sometimes funding a 1st or 50th transaction requires someone with the resources and experience with structuring multiple funding rounds to achieve a goal.

I will be ready to hold your hand to get you through your first flip or purchase of a rental property, or refinancing of a portfolio or project that is about to balloon, or you just want to explore new terms, it’s no risk! I never charge consultation fees to quickly go over a loan scenario or help a borrower through the process.

If you have an interest in real estate investing, flipping, or in the market for a loan, please contact me.

Wholesaling and Flipping

Many people start off wholesaling properties – this is another term that is often used freely and could mean many things, but for this article, I’m referring to finding sellers and properties listed with agents and matching them with your investor and buyer lists to earn marketing fees for facilitating the transaction.

Investors AKA check-writers need “boots on the ground” in order to drive leads for analysis. This builds their funnel, you keep a flow of target properties coming their way, they’ll reward you with fees of $1000-$10,000+ depending on the deal and the principals.

Using my old-school approach and combining this with technology and tools, you’ll learn to structure deals from on-the-job training, but I’ll be here to answer your questions and hold your hand.

Private Lending Consultant Flight School

I offer mentoring – in these formats: Live, and on your schedule, we’ll have phone calls and Zoom screen-shares, you’ll get lots of resources including documents, templates, marketing and full instructions. Tactics that work in today’s market! You can get more info here.

Private Lending Success Video Course

I’ve Pre-recorded 6 modules that will teach you the basics and tricks I use in private lending, perfect for real estate agents, loan officers, real estate wholesalers, even those looking for another source of income. This course is short – 4.5hrs, and will teach you how to use a mobile phone to launch an extremely effective and powerful marketing campaign.

Download Private Lending Success Ebook FREE for a limited time!

Visit this link and confirm your email and receive the PDF

You can register for free on my pre-launched site Lender Tribune

Or if you want to pay a few dollars, go over to Udemy and sign up there.

greg@fixandflippers.com

323-632-3279

Tips for Buying an Accessible Home


Your home is a space where you can escape the hustle and bustle of the world and enjoy some peace. When you’re shopping for real estate, you want to find a property that suits your personal style and needs. This is especially true if you are living with a disability. Individuals with disabilities tend to have lower-incomes, making the hunt for affordable yet accessible housing more challenging. However, with some advanced planning, time, and effort, you will find your dream home. Let the below steps guide you through the process.

Determine your budget and financing needs in advance

If you currently own a house that you are planning to sell, get an idea of how much of a profit you will make using a real estate valuation tool like Zillow. Look at properties similar to yours in terms of design and square footage in your area to get an estimate of how much your place might sell for. The money you make can go towards your down payment on your new place—ideally, about 20% of the total sale price. 

When investing in an accessible home, there may also be financing options available. For example, the U.S. Government’s Federal Housing Authority offers mortgage loans based on income received from Social Security Disability Insurance and Supplemental Security Income. You just have to prove that you will continue to receive these benefits for at least three years after applying for the loan. If you are unemployed or only employed on a partial basis because of your disability, such a loan can be helpful. 

Make a list of your accessibility needs

Different individuals have different needs in terms of accessibility. For example, individuals living with cerebral palsy are advised to get a house with a single-level floor plan that eliminates the need to climb stairs. If you have vision problems and require a guide dog, getting a house with a yard where your four-legged friend can get fresh air makes sense. Other characteristics that make a house more accessible include handrails, a shower with a seat, and doorways wide enough to accommodate a wheelchair. Keep your future accessibility minds in need as well: You might not need a wheelchair now, for instance, but will you require one down the line?

Odds are you won’t find a house that meets every single criteria on your accessibility checklist. Home renovations can help fill in the gaps. Take one of the most frequently used rooms of the house, for example—the bathroom. To make it wheelchair accessible, you can have the doorways widened, add a walk-in shower, and lower the height of the sink.

Leave plenty of time for a smooth move

Once you’ve found your accessible home, start preparing to move. To minimize stress, leave plenty of time for the transition. Plan on packing up one room at a time so that your entire house isn’t turned into a whirlwind at once. Use colored post-its to specify which boxes should go into which rooms, and keep a list of how many boxes you have per room to ensure nothing gets lost. If you are going a long distance, consider a hybrid move. With this approach, you divide your move amongst three providers—local movers to unpack your house, a transport team to drive your goods, and local movers in your new location to unload the truck. This approach tends to be cheaper and can save you up to 40% on moving costs.

There’s no need for house hunting and moving to be a stressful experience. With these guidelines, you will be able to find an accessible home and enjoy a hassle-free move. Just give yourself some time and soon enough, you’ll be comfortable in your new house.

Photo Credit: Pixabay.com

Guest Blog Post By: Patrick Young

Email: patrickyoung@ableusa.info

Creative Commercial Mortgages Being Funded Nationwide from Our Partners


We work with strong commercial lenders, they are nationwide direct non-bank lenders. They provide Transactional loans, they are one of the few  SBA Preferred Lender and they specialize in owner-occupied properties.

Some of the deals they’ve funded are:

Atlanta Office Building

Office Building in Atlanta the loan was submitted on a Wednesday, and they had approval by Friday. They sent docs out the following Thursday to meet the close of escrow. This was a 65% LTV Conventional loan of $2,080,000

Childcare Funding

They rose to the occasion with a lucky teacher in GA, funding a childcare facility using an SBA 7A loan with a high LTV (87.5) in a rural setting and startup business! They had other obstacles but persisted with creative financing and some additional collateral, they were able to close!

Industrial building funding

With an Industrial auto service bank turn-down that was submitted on the 16th for approval; by the 27th they used a SBA 504 loan and a combo 1st Trust deed and Bridge loan totaling over $3.3M. They closed this 90% LTV loan in Los Angeles in 2 weeks.

Fast Food Funding

Even after several lending institutions passed, because there were very minimal industry ownership/management experience, they were able to fund a fast-food purchase with a 2 loan combo for over $550,000 in CA.

Construction Company Funded

Our partners pleased their Construction company borrower after performing on a previous loan, they received the opportunity to fund a refinance of an existing asset, the borrower had issues and were declined by 3 other banks, the current loan had matured, and the borrower needed a 6 figure cash-out for working capital,  they obtained a 60% LTV conventional loan for $600k cash-out.

SBA 7a Loan Funding in North Carolina

They provided a $1.1M cash-out on an office condo in NC for a borrower to pay their taxes to be eligible for an SBA 7a loan to refinance a second building with working capital.

Office Funding in Florida

They were able to beat out a local bank for the business of a top operator who purchased an office in Florida for $300,000 at 85% LTV.

Retail Funding in San Francisco

Creatively speaking, our partners think outside the box and know the markets, they financed the purchase of a mixed-use retail and residential property that penciled out and had aggressive projections, at 80% LTV they made a loan over $1.3M in 32 days in San Francisco.

Hotel Purchase in Colorado

A hotel purchase in Colorado with a 2 loan combo, and over $4M in creative financing, the change in hotel flag due to change in ownership was an issue for some banks but my partners closed it up!

Multi-Tenant Refinance in Los Angeles

In Los Angeles, I  was happy when they performed great on a private money loan funded a multi-tenant refinance, taking the owner out of a high-interest loan to a low-interest conventional loan at 65% LTV.

Closed Despite Bankruptcy, Lien & Judgements

They were able to defeat multiple obstacles with a client that included: 2 operating companies, multiple affiliate businesses, inconsistent cash-flow, and a history that included a bankruptcy, multiple state lien &  judgements for over $1.6M.

Expansion Funds for a Construction Company

They helped an established contractor of 32 years fund an expansion for their business for over $850k, based on projections.

Cannabis & Hemp Funding

If you have the experience, cash reserves and good to great credit, we can look at Cannabis and Hemp financing requests.

If you’re in need of Commercial Financing, Contact me – Greg@fixandflippers.com with your Loan Scenario

On-Demand Project Managers to Your Site! Perfect for Contractors and Home Flippers


Why is Residential Construction is Ripe for On-Demand Disruption?

With a record year for the on-demand industry in 2019, the big prediction for 2020 is that on-demand companies will expand to new industries.

This is happening now in residential construction. A common issue with residential construction is going over budget, not meeting deadlines and plainly losing (wasting) money primarily due to lack of communication.

Most contractors do not use project management software to keep their jobs in-line.

95% of all residential remodel projects end up in frustration. Homeowners go into a project excited about their contractor only to soon be in the dark about what is going on.

TRY Project Buddy Services Today!

Check out: The new on-demand startup “Project Buddy” http://www.projectbuddyservices.com is the 1st of its kind and planning to revolutionize the industry: Creating completely transparent transactions between homeowners and contractors. Simply put, Project Buddy helps organize projects.

Project Buddy
Project Buddy Founder, Robert L. Williams

“After years of consulting in the construction industry I found that almost every job had a point where the client thought they were being cheated, it was almost always due to a simple lack of communication. Construction remodel projects are very organic and change daily. I started Project Buddy to help both Contractor and client stay up-to-date on a weekly basis.”

Project Buddy, from PGN Design Group, works with a cloud-based construction software that all parties have access to with their smartphone, tablet or computer. Project Buddy finally makes it easy for homeowners to follow the progress of their construction project from anywhere and makes it easy for contractors to keep their clients updated on day-to-day progress of their projects. It works with 5 easy steps.

  1. Upload project information to Project Buddy cloud-based software.
  2. Take daily photos of the project.
  3. Create daily work logs.
  4. Contact all contractors, subs and architects for scheduling purposes.
  5. Create an “end-of-week” report for the project.
project-buddy-logo

So who’s doing the actual work? Numerous “Buddy’s” manage jobs in the areas that they live in. They can work as much or as little as they want. Think of it as the “Uber for Construction Projects“.

The service will operate on weekly contracts so that there is no big commitment from homeowners or Buddy’s. For contractors, there’s no need to hire and train full-time employees only to have the burden of their salaries on the books when it gets slow.

At the end of each week, clients have the ability to either “opt-in” if they like the service or “opt-out” and we’ll see you on the next one!

Project Buddy will have the ability to do one or all of their jobs. The company is poised to disrupt the residential construction industry by helping smaller companies with growth, and larger companies with quality control. The price is $497/week for most projects, cheaper than the cost of a laborer sweeping up the site!

Why Use Them?

  1. Lost Time = Lost Money
  2. Cloud-based Software = Transparency, 24/7 access from any device.
  3. Organize contractor = Get’s the Job Done on time and on-budget!
  4. Weekly contracts = No Big Commitment
  5. One low rate for any size project (single-family or multi-family)

Project Buddy has launched in Los Angeles and the San Francisco Bay area with expansion to other major cities in the U.S. later in the year.

Preferred Partners:

  • Contractors/Developers – Instead of carrying a payroll employee as a superintendent, we can replace that cost, and we have no problem with working for 1 week..
  • Real Estate Agents – You know all of the Wholesalers, Flippers and Homeowners doing remodels, refer our service and receive a $497 referral for each.
  • Architects – You work with homeowners and flippers too, with our service, you can monitor the project remotely and not get left out of the circle. Refer our service and receive a $497 referral for each.
  • Hard Money LendersCLOSE MORE LOANS. We can act as a 3rd party service provider that can be financed and used as a kind of “insurance policy” Lenders can require their borrowers to use Project Buddy, and they’ll always know what’s going on with the project! Two words – Accountability Partner. Protect their loans. Fewer foreclosures will increase bottom-line. No COST to the Lender – You can build it into the loan (its a cost of doing business)
  • Owner Builders – You want someone to babysit the work-site, and you don’t want the job?
  • We’ll help week-to-week until you don’t need us anymore! You can see all the progress on your smartphone or preferred device, and read the notes left by the Buddy. Perfect Communication!

Book us for one job, for one week and you will quickly see how easy and smooth your job/s will run.

Find out more about our services TODAY www.projectbuddyservices.com

Or Call Greg Direct – 323-632-3279

Nationwide Commercial Loans for Investors


Need Capital to Retrofit your Soft-Story Building in California?

We can help!

  • 2nd TDs on Commercial and Multi-family buildings in California
  • Rates start at 8.99% at 40% CLTV 
  • Up to 12.99% at 65% CLTV or for difficult area / condition
  • Min. 6 months interest on 3-year loan
  • Min. 12 months interest on 5-year loan
  • Loan amounts over $50k OK

Los Angeles, Pasandena, West Hollywood and Santa Monica City have mandated the retrofitting of multifamily soft-story buildings.

Top Markets

Los Angeles, San Francisco, San Jose, San Diego, Sacramento County

Standard Markets

Riverside, San Bernardino, Ventura, Orange, Bakersfield, Fresno County

Acquisitions or Refinances, Workouts, Recapitalization on stable and transitional assets

Highlights

  • National Lending
  • Freddie Mac Multifamily Small Balance Loans $1M to $7.5M – Cashout is available. Min – 5 residential units. 85%-90% occupancy required.
  • Top Markets: New York, Northern NJ, Long Island, Boston, Washington DC, Chicago, Los Angeles, Orange County, San Diego, San Francisco, San Jose, Denver, Miami/Ft. Lauderdale, Minneapolis, Portland and Seattle. 
  • Contiguous site properties no limit 5+ units
  • Scattered site properties no limit 5+ units
  • Flexible Terms 5,7,10 year options with 30 year, Hybrid or Fixed options.
  • Interest Only Options
  • Non-Recourse
  • Competitive Rates in the 4’s and 5’s
  • Conduit/CMBS loans from $1M to $75M
  • Bridge Loans from $1M to $75M
  • Preferred Equity/Mezzanine Financing from $2M to $50M  
  • National primary and secondary markets accepted.
  • Structured Equity/JV Financing from $3M to $20M
  • Emerging Development Fund (Pay pre-development and acquisition costs from $75k to $2.5M) 
  • Your pricing would depend on Pre-Payment structure, Loan LTV, Income Profile and Interest only period.
  • Providing Joint Venture preferred equity behind GSE mortgages. One stop shop for your commercial real estate asset types.
  • Pre-Development – To be used for: Acquisitions, legal costs, costs for third-party reports (eg. Environmental assessments and appraisals) design plans, tax credit applications, deposits and other pre-development costs.
  • Rental Housing, Commercial; Industrial and Mixed-use projects are acceptable.
  • Pre-Development ($100k-$750k) 80% of budget
  • Pre-Development & Acquisition ($1M-$2.5M) 30% of total budget
  • Flexible pre-pay. Can be 1st or 2nd position mortgage with personal guaranty. Full Recourse. 

Eligible property types:

  • Multifamily
  • Mixed-Use
  • Retail
  • Office
  • Industrial
  • Self-Storage
  • Independent Living
  • Medical Office
  • Student Housing
  • Mobile Home Parks
  • Hospitality in major and secondary markets

#FreddieMacSBL #CMBS #BridgeLoans #PreferredEquity #StructuredEquity #Mezzanine

Inquire Today!

Hot New Investor Loans to Watch for in 2018!


Happy New Year!

This year one of my goals is to become an even larger resource for the Fix and Flip & Investor Community. After 16 years of service in this industry, we connect investors to lenders and private funding programs nationwide.

After reviewing these new loan offers and working with dozens of lenders, I compiled this list of lenders to refer to interested parties.

I hope you enjoy!

-Greg

New Private Loan Options for Investors and Flippers!


What an amazing year for private funding, hard money, commercial funding, equity funding, business funding, unsecured funding; all kinds of capital for many purposes.

Lenders are stepping up to make loans in ravaged areas in Florida  & Texas, as well as nationwide in major urban areas.

Fix and Flippers works with key lending partners to provide the best loan terms and flexible structures so investors have multiple options for leveraging their hard-earned capital.

The climate of private lending has changed because competition has greatly increased, also the influx of 1st-time flippers hungry to get a piece of the pie has produced a perfect storm: lots of inexperienced & unqualified applicants to pre-screen and underwrite – it’s a very expensive operation if you have your underwriters, processors, and assistants burning through hours of documents if they don’t lead to real closes with ROI for the investors involved & for the brokers who bring the business.

This has resulted in more restrictive requirements for approval such as Fico score minimums – from my experience, they question why a successful businessperson who is worthy of a risk of $100k-$1M wouldn’t be able to pay even $1000 to repair and clean up their credit? Also, please don’t mention 2008 or the past economic events – they don’t want to hear that! It’s 2017.. Bottom line – without 650+ fico scores expect high-interest rates (9-12%) and lower LTV’s due to you being a credit risk (80%-85% LTV max)

What mitigates your credit score IF you have a great explanation? (like a recent credit event within the past 2 months caused your score to swan-dive)

Having lots of experience (recent experience) again, don’t mention 2008 or prior…and most lenders may look the other way and consider you a better risk.

What if you don’t have recent experience and your score is not 650+? Then I’d be prepared to bring 15% down-payment, and it doesn’t necessarily need to be seasoned or sourced, but it has to be documented..so have a statement to prove you have it.

Also, I have a great contact that I use for credit repair and authorized user trade lines (I know the account holders) – just ask me for those referrals!

What if you have no experience, and have no down-payment, but have good credit 680+ fico?  I’d suggest you apply for my unsecured-credit program to raise up to $250,000 unsecured credit lines/cards in 1-2 weeks to create a 100% financing scenario!

If you are a great candidate – have completed multiple flips and/or rental purchase/acquisitions within the past 24 months, 650+ fico, and 3-6 months of interest reserves in your bank account, I can roll out the red carpet for you in most cases: 90% LTC or 90% purchase, 100% of rehab, luxury spec builds/construction to $2M-$50M, commercial refinances with cash-out or purchase 75%-80%, even small loans from $50k.

Niche Loans: Gap Loans – These are 2nd TD loans that we make behind our 1st TD’s, never others. We will gap great candidates with lots of deal flow that have experience, capital, average to good credit and the deal must be in an urban area and pencil at or under 65% of ARV (after-repaired-value) Lots of our lenders make loans nationwide.

Commercial  Financing- 3yr/8yr/ fixed, special pricing this month! Hotel, Apartment, Industrial, Self Storage, Solar Projects, Multi-Family, Office, Warehouse, NNN properties, Shopping Center, Assisted Living, Residential portfolios, Construction Loans, Mobile home Parks, Resort properties. Bridge loans, SBA

We can make QUICK (3-5 day loans) against Free/Clear properties up to 50% LTV, max loan is $50k, the minimum is $5,000!

With my 16th year in real estate, I’d consider myself a massive resource center, and its hard to turn those contacts into a commodity,  I hope points & rates won’t keep the best candidates from reaching out! Most of the time, I only give the best deals to people whom I have done business with (broke bread) once we feed each other, I know we have a mutually beneficial relationship.

Let’s finish the year strong and build some alliances! 

Greg@FixandFlippers.com – 323-632-3279