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

Investor Bailout Loan Options Available.


Need an Emergency Loan?

Lenders I work with are making loans for homeowners in foreclosure or default.

Bail Out Loans

They are very effective in assisting homeowners in foreclosure or Default in restoring their loan Situation.

65% L.T.V Cash out with Default or Foreclosure

Our Specialty loans

  • Bailout loan 65% L.T.V 
  • 2nd T.D. For Business Purpose up to 65% C.L.T.V
  • Land Loans up to 70% 
  • Purchase Fix and Flip 90%  with 100% Rehab. 
  • 1 Day in the Investment business no problem 80% L.T.V. Purchase.
  • 1 Day on Title 70% L.T.V Refinance N/O/O

Gap Loans

Gap loans are generally high interest, last option loans that may cost 12% + APR and more than likely will cost a chunk of your profit on the back end. Many lenders will ask for up to 50% of your profits.

Most lenders won’t gap behind another lenders loan. If you lack the funds for a down-payment but your deal has a lot of current or potential equity, you may persuade them to go up to 75% of the ARV or after repaired value. This would include funds for acquisition, rehab and holding costs such as interest payments, etc.

Gap loans can also be self-generated by way of unsecured credit lines, business credit lines or term loans.

Also EMD funding is available to assist in certain situations.

Business Lending

They provide capital based on an average of $10k monthly deposit and 6 months in the business. They can fund in as little as 5 days. 

Residential, Multi-Family, Commercial, Specialty Properties and Land

Large or small, condo or townhouse, house or Mansion. 

Contact Me greg@fixandflippers.com

Hard Money and Private Funds Available for Investors


Hard Money & Private Funds Available for Investors
Loans from $75,000
Not many lenders arrange loans as small as $50,000. We will!
Fix and Flip
We lend up to 90% of the purchase price and 100% of the renovation budget. In addition, we don’t charge interest payments on the rehab dollars until it is drawn.
Competitive rates and fees 
You came to the right place if you are looking for a private or institutional hard money!
Bail Out Loans
An equity-based program. If we can keep it under 65% LTV, we can bail
you out in 7-10 days. (Only CA and TX)
Commercial, Land, Agricultural and Specialty Properties
Commercial, apartments, land, Wearhouse, partially completed construction projects, industrial, automotive and many other types of properties are those we lend on.
2nd and 3rd Mortgages
We arrange second and third mortgages every month.  (Only CA, TX)
Construction Completion/Development Project
Got construction project? We have multiple ways to structure your file, so you can complete your project and get it sold!
Business/Merchant Funding
Do you need working capital/payroll/expansion for your business? We
can fund in 5-7 days. To qualify, all we require is the business to be
established for at least 6 months and provide 6 months business and
credit card-merchant processing statements. 
                                                                     
Long Term Rental Loan Programs                                                                      We offer 5,7,10 and 30-year fixed term, starting at 5.875% rate and can
leverage up to 85% LTV

Gap lenders Can Earn 25% in 90 days! $25,000 Min investment


blonde-money

I’m looking for Gap Lenders, Angel Funders, Trust Deed Investors and those who want to become the bank!

I know of a few operators looking for strong financial partners.

Even if you only want to invest $25,000, we can put it to work for you.

Your investment will be secured by either 1st or 2nd Trust deed and promissory note. You’ll also be added on the homeowners insurance.

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If you have lazy funds sitting and you want to grow your nest egg, contact me right away!

We have opportunities in CA, FL, GA, TN, IL just to name a few.

We’ll make it easy for you to part with your hard-earned cash!

friend-pulling-money

These are being generated weekly! So you can easily “roll” your funds into the next investment and avoid taxation.

I’m also working with a fund who is looking for investors who want to earn a steady 10% – you have to be accredited for this program.

Gap Lenders, Angel Funders, Check writers! Please contact me now!