Question regarding short term EMD lending or “gator lending”

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Question regarding short term EMD lending or “gator lending”

Kristi Tietz
Member since 2021 · 23 posts · 9 votes

Hi everyone, I'm a novice investor just getting started and it seems like short term EMD lending or "gator lending" is a great way to go. I have an investor looking to borrow 10k for an EMD in Austin, TX. Is there an easy way to go about that and what is a reasonable amount to ask back on a 30 or 60 day loan? I'm what about contracts/legality? Thank you in advance!

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Dane Barney
Lender · Benson, AZ · Member since 2019 · 5 posts · 31 votes
4y

Hi Kristi, 

I am gator lending! Not a bad idea at all! You have got to be sure your contracts and terms are solid and ran through title to be sure you are protected. 

24Reply
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  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    4y
    Quote from @Kristi Tietz:

    Hi everyone, I'm a novice investor just getting started and it seems like short term EMD lending or "gator lending" is a great way to go. I have an investor looking to borrow 10k for an EMD in Austin, TX. Is there an easy way to go about that and what is a reasonable amount to ask back on a 30 or 60 day loan? I'm what about contracts/legality? Thank you in advance!


    You've got some 'splaining to do. Don't have a clue what you're talking about. Give more detail and the process, s'il vous plaît.

    .

    0Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    4y

    It “sounds” like you want to lend someone money for an earnest money deposit to make an offer on a property?

    How many ways is this a very bad idea? I mean you know they aren’t closing, they don’t even have the emd, much less the downpayment. So you know they’re broke. 

    Now let's say they figure out they're broke and don't go through with a deal. What if they lose the EMD because they don't have a valid cancellation reason, or they miss a deadline or miss a line that says all EMD is non-refundable. Do you think you have ANY chance of getting ANY of that money back EVER? No. The answer is no, you do not.

    So if you want to gift a friend or family member the money, go ahead, but don’t call it a loan, and count your blessings if you get anything back. 

    If you meant something else, then yes. Please explain. 

    8Reply
  • Dane Barney
    Lender · Benson, AZ · Member since 2019 · 5 posts · 31 votes
    4y

    Hi Kristi, 

    I am gator lending! Not a bad idea at all! You have got to be sure your contracts and terms are solid and ran through title to be sure you are protected. 

    24Reply
  • Kristi Tietz
    OP
    Member since 2021 · 23 posts · 9 votes
    4y
    Quote from @Dane Barney:

    Hi Kristi, 

    I am gator lending! Not a bad idea at all! You have got to be sure your contracts and terms are solid and ran through title to be sure you are protected. 


    0Reply
  • Kristi Tietz
    OP
    Member since 2021 · 23 posts · 9 votes
    4y
    Quote from @Kristi Tietz:
    Quote from @Dane Barney:

    Hi Kristi, 

    I am gator lending! Not a bad idea at all! You have got to be sure your contracts and terms are solid and ran through title to be sure you are protected. 



    0Reply
  • Linda Garcia
    Member since 2022 · 14 posts · 11 votes
    4y

    An unsecured loan, as this one seems to be, would not be eligible as a source of funds for someone doing conventional financing. If they were to deposit it into their account, we would back that deposit out from their balance as if it never existed, which then puts them in a position where they are still not showing sufficient funds to close or reserves and won't qualify for the loan. If they don't have the funds at the beginning, I'm not sure where they would have the funds to pay you back ever? I could see this being useful in a BRRRR scenario, but in that case you could be looking at a much longer term loan than 30-60 days, especially given supply chain issues and the uncertainty of the person being able to qualify for the cash out loan as rates continue to climb.

    0Reply
  • Roger Bremmer
    Investor · Las Vegas, NV · Member since 2020 · 9 posts · 0 votes
    4y

    @Mike Hern I’m a gator lender I don’t know if I can post in here about it

    1Reply
  • Beth JohnsonPro Member
    Lender · Renton, WA · Member since 2018 · 215 posts · 216 votes
    4y

    @Kristi Tietz

    I'd be very careful using this tactic to get started, especially if you plan to use borrowed money to lend out such as HELOC or credit cards. While this is being promoted as a safe way to get into real estate by some experts or gurus, there is no way to secure your loan with real estate when the money is used as a deposit before the purchase is closed. And there is zero equity buffer to protect your loan either, meaning the loan to value (LTV) is 100% which is super risky.

    I'm sure there are some that are confident in going this route because they know and trust the borrowers they gator lend to but people fail people they know and trust all the time -think divorce rates are low? So it's pretty risky to put loans out solely on relationship with no skin in the game. Sometimes this failure isn't the borrower's fault - like market fluctuations, seller remorse, or flaky GC who isn't showing up on the job site. The reality is these things happen often to no fault of the borrower so relationships should not be the sole way to secure your loan.

    Some folks will say they do it and it works great but one can say that only up until it doesn't work great and with zero security and no equity buffer protection, you're bound to lose eventually.

    BiggerPockets has a book coming out next week on how to safely do private lending as the lender. You should check it out - I Co-wrote it so happy to help answer any questions you might have!

    [email protected]Podcast Guest on Show #210
    8Reply
  • Kristi Tietz
    OP
    Member since 2021 · 23 posts · 9 votes
    4y

    Thank you so much, Beth. I would love to check the book out. What you said makes perfect sense, and I appreciate you sharing ur knowledge with me!

    0Reply
  • Beth JohnsonPro Member
    Lender · Renton, WA · Member since 2018 · 215 posts · 216 votes
    4y

    @Kristi Tietz

    Happy to help out anytime. There are good ways to lend out money and not-so-good ways to lend. Unsecured (no real estate as collateral) is not a great way to lend nor is secured loans with no equity to protect your principal investment. The book is in the bookstore on BP and will officially be released this Thursday the 28th and it is packed with information on how to protect your capital investment and make sure you handle things legally and thoroughly.

    [email protected]Podcast Guest on Show #210
    1Reply
  • Alex BekezaBusiness Member
    Lender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    4y

    @Kristi Tietz Even if you charged some ridiculous amount of points I can't see how this would be a good risk vs. reward ratio for you. Investors really should not be in a place where they're borrowing EMD from anyone IMO. If he doesn't have the $10k for EMD how is he going to have the $10k to pay you back when the contract falls out?

    [email protected]818-606-8823
    Investor Property Loan5306 Reviews
    WebsiteView Page
    1Reply
  • Marina Yamamoto
    Investor · Oahu · Member since 2021 · 2 posts · 9 votes
    4y

    I’m also a gator lender, and I use the attorney drafted documents that Pace shares with his gator tribe. I would not do it withOut these docs! You might be able to join our tribe through Prime Corporate Services. Maybe call them and ask if Pace Morby is still accepting new gators. 

    13Reply
  • Jesse LeBlanc
    Investor · Atlanta, GA · Member since 2016 · 627 posts · 374 votes
    4y

    I fund a LOT of double closings for wholesalers, but I personally do not fund a wholesalers EMD, just the final amount owed on the AB side of their double closing.

    I know some folks that do, and they have their contracts that protect them.  It's certainly an easy thing to do, super low barrier of entry but also VERY HIGH RISKS if you don't use the right contracts, and I can imagine some folks sending $ before getting their contracts signed and forget OR trust someone else and boom....LOSE all of their $, and rightfully so to the seller.

    I know new folks or those who lend on EMD would disagree, but I personally wouldn't want to deal with the headaches on these very small amounts of $ and the wholesalers that need it.  Someone that doesn't have $500-$1000 like so many common EMD amounts, I'm not sure they would value or care much about lenders money.  No skin in the game generally means no reason/need to care (except those who truly value relationships and other peoples money).  So with that said, you then would have to make sure your contracts are flawless AND you likely will be doing more work constantly checking in on Due Diligence periods, the wholesalers contracts, their amendments, keeping up with the closing company etc. 

    A lot of work for small $, but I also respect the hustle from folks that don't have much $ and trying to build their business and capital.  

    5Reply
  • Daniel PaloscioBusiness Member
    Lender · Tampa, FL · Member since 2013 · 228 posts · 95 votes
    4y

    @Kristi Tietz

    Gator lending can be an excellent way to make extra money, but I agree with some others in here that it may be more of a business model for experienced investors. As a nationwide transactional lender, we get requests all the time for gator lending opportunities and a lot of them end up being a little sketchy. I would say that if you have a great relationship with your investor and you know that if things go south, they will pay you back, then you could potentially move forward with the deal.

    If you'd still like to move forward as a gator lender then there are 3 main things you will want to focus on:

    1. Is the title company reputable - this part is easy

    2. Do you FULLY & COMPLETELY understand the contract - this is the key. You will want to make sure that you are aware of any and all deadlines and fully understand contingencies. You will want to make sure that you have the right to exercise those contingencies in the event that you need to back out to get your escrow deposit back. 

    3. Contract with your borrower

    3Reply
  • Michael Radney
    Richmond, VA · Member since 2019 · 29 posts · 22 votes
    4y

    @Kristi Tietz I've done some transactional funding for a few investors but I was branch manager for a mortgage broker in a previous life, so I'd overseen and fixed hundreds of closings. There's so much nuance you learn on the title side of things, about where things go wrong, what can cause problems, which moving parts need the most attention. I wouldn't have ever attempted it as a beginner. I funded a few distressed property sales, the investor had skin in the transaction, my money came in last, my funds never left escrow and I was paid back through the HUD-1 (closing settlement statement). I would have never done it if I hadn't personally known the title company owner and how he handled business because ultimately he was the one protecting my funds.

    4Reply
  • Bryan Contreras
    Member since 2021 · 21 posts · 8 votes
    3y

    @Marina Yamamoto Hello Marina, whats been your experience as a gator lender? When did you start? Are you pulling in 7 figures yet?

    0Reply
  • Kristian McCreary
    Member since 2022 · 3 posts · 5 votes
    3y

    @Dane Barney How can i contact you? I could use a gator loan

    2Reply
  • Jesse LeBlanc
    Investor · Atlanta, GA · Member since 2016 · 627 posts · 374 votes
    3y

    @Kristian McCreary, do you need just EMD funds or are you looking to get 100% of your AB side purchase funded, using Transactional Funding? I'd love to assist if you're in need of more than jut EMD $

    0Reply
  • Kristian McCreary
    Member since 2022 · 3 posts · 5 votes
    3y

    I initially was only interested in EMD but I could potentially be interested in double closing on market deals. Would it work more like a JV partnership?

    3Reply
  • Daniel PaloscioBusiness Member
    Lender · Tampa, FL · Member since 2013 · 228 posts · 95 votes
    3y

    @Kristian McCreary no, the deal would actually be 100% yours. You do not have to JV. As long as you are buying and selling the deal on the same day, with the same title company, transactional funding can be extremely cheap. Typically 1%.

    1Reply
  • Jesse LeBlanc
    Investor · Atlanta, GA · Member since 2016 · 627 posts · 374 votes
    3y
    Quote from @Kristian McCreary:

    I initially was only interested in EMD but I could potentially be interested in double closing on market deals. Would it work more like a JV partnership?


    I can PM you, but it wouldn't be a partner or JV. I know since BP won't let me put much info on here or they consider it spam or marketing and possibly delete the message. So I'll just PM you and you can also see my website for the full details to vet me out, check out my google reviews and testimonial videos etc. :) It's in the signature below. :)

    0Reply
  • Luke Gibson
    Investor · Clearwater FL · Member since 2022 · 16 posts · 12 votes
    3y

    Hey Kristi, I'd be happy to help with your ventures regarding EMD or any other transactional funding. I am familiar with the paperwork and everything that goes into the process and would love to chat

    1Reply
  • Reid Ferguson
    Rental Property Investor · Denver, CO · Member since 2019 · 16 posts · 46 votes
    3y

    @Kristian McCreary let me know if you're still wanting help with EMD. I can help you with that for sure!

    0Reply
  • Jonathan AbradoPro Member
    Member since 2021 · 18 posts · 28 votes
    3y

    Hey Kristi,

    Did you end up taking Pace's Gator course? If so, would you be willing to share your honest feedback?

    Thank you!

    6Reply
  • John Bergquist
    Scottsdale, AZ · Member since 2015 · 3 posts · 15 votes
    3y
    Quote from @Marina Yamamoto:

    I’m also a gator lender, and I use the attorney drafted documents that Pace shares with his gator tribe. I would not do it withOut these docs! You might be able to join our tribe through Prime Corporate Services. Maybe call them and ask if Pace Morby is still accepting new gators. 


     Hi Marina,
    How's the Gator Lending going? I'm thinking of joining Pace's Gator mentorship? 

    0Reply
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