Tag Archive for: gap funding

Where to Find Gap Funding

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Where to Find Gap Funding

In the past few days we have spoken with 4 clients who lost properties because they didn’t secure financing beforehand. While getting into real estate investing requires a lot of planning, it is imperative that investors set up their money correctly from the very beginning.  This often includes finding gap funding options prior too shopping for properties. Those who take the time to set things up correctly will have more opportunities than those who wait!

What is gap funding?

Gap funding is borrowing money from someone for the down payment, carry, or any money that you have to put into the deal. When you are buying a property, the first lender requires something in order to approve the loan. This could be a down payment, reserves for payments, or they may require you to do the fix up. Many investors don’t have the additional funds that are needed in order to meet the lenders requirements. Real estate investors might go out and find a family member, friend, or someone in the real estate community who can lend them that money to bridge the gap. It is important to make sure that your primary lender allows gap funding before purchasing a property. If the lender doesn’t allow gap funding, it could jeopardize the deal. 

How do you find gap funding?

There are a lot of people out there who have anywhere between $10K to $50K that they are looking to invest. By working with you, they have a chance to receive a better return on their investment. So how do you find gap funding? There are real estate groups throughout the community that provide opportunities for investors to meet. While peer investors are not often interested in diving into real estate themselves, they are interested in getting a better return on their money. While you can start by asking family and friends, many fear that it will create an awkward situation. By finding peer investors in the community who have $100K or $200K set aside, you will be able to compete in today’s market!

Ready, set, GO!

In order to be successful in real estate it is important that you find and secure funding prior to purchasing properties. Thankfully there are a lot of options out there to help investors. These include HELOCs, credit cards, and peer lending, just to name a few. Here at The Cash Flow Company we have seen people use multiple ways to get the gap covered. Those who take the time to  gather pre-approvals, will be ready to go when the next deal comes!

Contact us today to find out more about gap funding and what you need to do to get pre-approved.

Watch our most recent video to learn Where to Find Gap Funding

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How to Compete in Today’s Real Estate Market (2024)

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How to Compete in Today’s Real Estate Market (2024)

In the past few days we have had 4 clients who lost properties that would have been really good flips. The reason that they lost the deal was because they didn’t secure financing beforehand. While getting into this business requires a lot of planning, it is imperative that investors set up their money correctly from the very beginning.  Those who do will be able to compete in today’s market and have more opportunities for the best deals! 

New investors prepare!

Those who are new to real estate investing should focus on setting up the proper financing immediately! The last thing that you want to do is to put a property under contract and not close . This could burn the relationship that you created with the realtor or wholesaler. Instead of being at the top of their list for good properties, you will instead move to the bottom of the pile.  Here at The Cash Flow Company we want to give you the competitive advantage. Part of that is making sure that you do everything correctly. It is a business! As a business it is important that you get pre-approved for the loans you need. 

Don’t miss out on deals!

Oftentimes real estate investors miss out on amazing deals because they are not prepared. Whether you are new or just into a new adventure, it is important to set yourself up for success from the beginning. If you are going to get into the real estate game, make sure that you are not only looking for properties, but that you are also keeping the money flowing. What do we mean by keeping the money flowing? Maybe you need 100% financing, need a second, or you’re new to flips and need to know what to do. By talking to lenders as you find properties and getting pre-approved, it will help you to move forward quickly on deals. 

Choose the right lender for the deal.

One of the most important things that you need to do as a real estate investor is to create a good relationship with lenders. Those who have a good relationship with their lender will be able to consult with them prior to purchasing in order to see what financing options are available. One thing to keep in mind is that your lending needs will not only change over time, but they will change depending on the property. For example, financing on a fix and flip will be different from the financing on a rental property. It is important to look around and evaluate your lending options annually in order to find the best options for you. 

How do you get pre-approved?

Before seeking out a pre-approval, it is imperative that you know what type of property you are looking for. Are you going to focus on flips, rentals, 1 to 4 units, or multi units. Those who do can then make sure that the lender lines up with what they are trying to do. By getting pre-approved can help you go into a deal with reassurance. How can you find the right lenders? The answer is by talking to those in the real estate community. They can guide you to the lenders who are closing, those who work with new investors, and also tell you about requirements that the lenders might have. 

Get the competitive advantage.

As you talk to lenders it is important to consider what their requirements are, and areas that you need to focus on. While one lender might require more money down, another may require a higher credit score. Find out all of the steps that you need to complete in order to guarantee pre-approval. Just to clarify, these steps can be done in conjunction with looking at properties. For example, you can work on improving your credit score or look for private money options while searching for properties. By taking your time to work through the process, you will have a competitive advantage.

What is gap funding?

Gap funding is borrowing money from someone for the down payment, carry, or any money that you have to put into the deal. When you are buying a property, the first lender requires something in order to approve the loan. This could be a down payment, reserves for payments, or they may require you to do the fix up. Many investors don’t have the additional funds that are needed in order to meet the lenders requirements. Real estate investors might go out and find a family member, friend, or someone in the real estate community who can lend them that money to bridge the gap. It is important to make sure that your primary lender allows gap funding before purchasing a property. If the lender doesn’t allow gap funding, it could jeopardize the deal. 

How do you find gap funding?

There are a lot of people out there who have anywhere between $10K to $50K that they are looking to invest. By working with you, they have a chance to receive a better return on their investment. So how do you find gap funding? There are real estate groups throughout the community that provide opportunities for investors to meet. While peer investors are not often interested in diving into real estate themselves, they are interested in getting a better return on their money. While you can start by asking family and friends, many fear that it will create an awkward situation. By finding peer investors in the community who have $100K or $200K set aside, you will be able to compete in today’s market!

Ready, set, GO!

One of the biggest hurdles in real estate investing is finding the funding you need to purchase properties! Thankfully there are a lot of options out there to help investors. These include HELOCs, credit cards, and peer lending, just to name a few. Here at The Cash Flow Company we have seen people use multiple ways to get the gap covered. Those who take the time to gather pre-approvals, will be ready to go when the next deal comes!

Contact us today to find out more about gap funding and what you need to do to get pre-approved.

Watch our most recent video to learn How to Compete in Today’s Real Estate Market (2024).

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5 Small Loans You Can Use to Help Your Business

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Here are the top 5 small loans we fund to our clients.

Most real estate lenders won’t touch small loans. Anything less than $75,000, and you’ll find many institutions won’t even fund you.

But for the last 23 years, we’ve helped thousands and thousands of investors fund billions of dollars – and one of our specialties is small loans.

We understand the important role smaller loans play in your real estate investing career. Let’s go over 5 types of small loans you might find a need for in your investments.

1. “Finish a Project” Small Loans

The first kind of small loan we fund is what we refer to as a “finish a project” loan.

It’s exactly what it sounds like: you run out of money on a project, and you need a bit more to get it over the finish line.

We help people with:

  • New builds that don’t have the money to finish.
  • Started flips that need a few more thousand dollars to get to market.
  • Rentals that require more capital to get to a rentable state.

We can fund these loans without touching your first mortgage on the property.

2. Small Town Loans

We help a lot of clients from small communities, or who invest in small towns. A lot of properties in these areas are available for less than $75k, so other lenders aren’t interested in funding them.

Just last month, we funded 3 properties like this. The number for each of them broke down like this:

  • Purchase: <$40k
  • Rehab: ~$20k
  • All-in: <$60k
  • ARV: $100k – $110k

There is a lot of money to be made on properties like this, yet most lenders wouldn’t fund this deal.

We don’t care if a property is rural or agricultural. If the numbers make sense, our loan is secure, and there’s money to be made for you, then we’d love to help you with small-town loans.

3. Gap Funding

Another loan we commonly do is gap funding.

Gap funding can cover a lot of different parts of a project. Anytime there’s an expense on an investment project that your primary loan doesn’t cover, a gap loan can come in to save the day.

These loans include:

  • Down payment (usually 20-30%)
  • Rehab costs (especially if your primary lender won’t include that in your LTV)
  • Carry costs (like mortgage payment, insurance, taxes, etc)

If you don’t have (or don’t want to use) your own capital or other lines of credit, we can come in with small loans to fill in these little gaps in your project.

4. Credit Usage Loans

Another popular loan we do is an “Improve Your Credit Score” loan.

Credit usage is a common sore spot for many real estate investors’ credit scores. Maybe you use your personal credit card to fix up your properties and pay it off once your flip sells or refinances.

In the meantime, you’re using up a high percentage of your personal credit limit. This usage negatively impacts your score, which in turn wrecks your chances of getting a great loan for your next project.

Where our loans come in is:

  • You take out a private loan with us.
  • Use those funds to pay off your personal credit cards.
  • Your usage goes down dramatically, improving your score so you can get approved for other loans.

5. Cash Flow Loans

The last of our popular small loans are the type that creates cash flow for your budget.

If you need to make payroll, compensate a contractor, get some extra capital for more growth, or any other business expense, we can provide a loan for that.

In this case, you don’t even need to be a real estate investor. You just need to own a piece of property that we could secure the loan with.

How a Small Loan Works

All of these loans work because you use a current piece of real estate to secure it. Our primary concerns are keeping the loan safe and making you money.

We don’t worry about your credit score, income, or experience levels. As long as they’re secured, we can get you small loans.

Have questions about how these small loans work? Need a smaller loan? Reach out at Info@TheCashFlowCompany.com and we’d love to see how we could help.

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What is Gap Funding?

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Gap funding

In the real estate investment world… What is gap funding?

You should never count on a bank or hard money lender to give you a loan that will cover 100% of your real estate investment property.

What you should be able to someday count on, though, is funding up to 100%.

So, what is this type of funding?

Definition: What Is Gap Lending?

Gap funding is the money you bring in from another source to fill any gap left between the lender and the project costs.

If a lender offers you 70% of the LTV on a property, this type funding is how you fill in the remaining 30%. Usually, you secure gap funding, although unsecured funding is possible.

A “secured” loan means that the debt is backed by a piece of collateral. In a typical gap funding scenario, the loan is secured by the property being purchased.

For the most part, you won’t be able to find a gap lender at an institution like you can a bank lender. Instead, gap lenders are family members, friends, or someone you know.

OPM vs Gap Funding

You can use a couple funding terms interchangeably:

  • gap funding
  • gap lending
  • OPM (other people’s money)
  • real people’s money

All of these terms get at the same concept. It’s money, not from you and not from an institutional lender, that covers whatever costs of an investment property that your lender won’t fund.

OPM can cover up to 100% of a deal, but for now, we’ll be talking about it in a strictly 100% funding sense. These are loans that fill in the holes of a project that a mortgage or hard money loan wouldn’t cover.

Check out our Youtube channel for more great information.

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