Amazing New Program for New Investors????

[Chris P.]

So the program seems pretty simple to me especially for someone starting out with not much capital that would allow them to be part of a flip. Yes I know there are hard money lenders but this does not appear to be a loan and would allow you to hedge the risk with little money down with an experienced real estate company. Seems like a win/win to me and I'm curious as to what other people thing about this route.

• Gorilla Capital provides 90% of acquisition and remodel costs
• Fix & flip operator provides remaining 10% of acquisition and remodel costs
• Gorilla Capital charges a monthly 1% management fee for capital in use
• Fix & flip operator earns 12% per annum on their capital in use
• Remaining net profit is split 50/50 upon closing

[Account Closed]

I don't see how a lender who charges 12% interest, takes half your profit, and THEN owns the property 100% after all the work is completed by their lendee (who by the way still has to put up 10% of the project) would be considered "too good to be true."  

It's a different business model--one that some might call "disruptive"--but they're not giving anything away for free. You're essentially their bird dog, agent, and contractor all rolled into one, and you just paid THEM for the privilege. But for people in expensive markets who don't have the 25% LTC DP that HMLs want to see (which keep in mind is less than the 25% LTV that most conventional banks want), it could be a way for more beginner flippers to build capital.

Personally, I'd be a little concerned about giving up all control over the property.  I'm pretty opinionated about design decisions and know my neighborhoods well.  In addition to dictating the choices you make as the rehabber/remodeler, a company that owns the property could simply decide to hold the property and give you whatever they say it's worth.  Not saying this company would do that, but they could.  Also with this model, you ONLY have the one exit strategy.  If the market shifts by the time you're done with the rehab, you can't hold the property--you'd have to take a loss.  That's a lot of time invested to relinquish all control yet still take on significant risk.  

All that said, if I were a flipper starting out, and despite all these considerations, it's still one funding strategy I'd look into, in addition to others, if I didn't have private money or personal capital.