Hard Money Lending & Gap Lending

[Rick Zink]

I understand the difference between the both of them.

While I am not the most experienced in the world, I do have some experience.  I own a few rentals that are cash flowing.  I have flipped a few and made a moderate profit.  To date, I have never lost money in Real Estate.  I attribute this to the dogged due diligence that I take before I close.  All of my previous properties I have either used a Bank mortgage or I have simply bank rolled myself.

Currently, I am in a position that I have an opportunity to purchase and flip two possibly three houses.  The time on Market is a little longer than what I  would like to see but the profit is solidly there...but I digress.

My reason for this post is that I am having a little bit of a hard time finding a Hard Money lender as well as a GAP lender.  Most I have found want me to buy into a program that I am happy to do but they can't seem to give me a clear understanding of what I am going to learn.

Can someone please point me in a direction that I can find helpful lenders that can assist me in acquiring these properties?  I do not want to let these slide by as I am looking at a handsome profit on each one.

Any help or advice is welcomed and appreciated.

[Ben Stoodley]

Hi @Rick Zink

Congrats on your successful real estate investing thus far! In my experience, most Hard Money lenders will not require any programs or equity deals, just debt financing. For example, we typically fund between 70-80% of the Purchase price in addition to 100% of the rehab estimate for our Fix n Flip loans. There is almost always some "skin in the game" requirement from the borrower, in our case generally between 20-30% of the purchase. I assume this is where your Gap lender will be coming in?

If so, just make sure your main lender providing you the bulk of financing will allow a 2nd TD on the property, most shouldn't have a problem. The Gap lender's rates are typically a little higher than the lender in 1st position.

Another option is to work with a lender that allows the down payment/skin in the game to come from other sources such as Seller Carry Back or Cross Collateral. This would potentially allow you to acquire and flip the properties with no money out of pocket (besides closing costs and interest payments). 

If you need any help on sourcing lenders or qualifying them, please don't hesitate to ask. I write many articles on the importance of selecting the right lender for  you and tips on how to research them.

Thank you and good luck!

Ben