Understanding cash-to-buyer overfunded loans

[Tiko Z.]

I'm trying to understand the process of cash-to-buyer overfunded loans for a BRRRR project. What are some requirements for getting an overfunded loan from hard money lenders? Do you basically need to present a hard money lender a wholesale deal with an estimated fixing cost and an ARV to acquire the loan?

Would appreciate any input!

[Patrick Roberts]

Quote from @Tiko Z.:

Quote from @Patrick Roberts:

What do you mean by overfunded loans? Are you asking how to get a loan for more than a property is worth?

My apologies, I guess "overfunded" is not a standard term and yes I've read it in a book and seen it in social media recently. From what I understood overfunded meant say a property is worth 100k and you get a hard money loan of a 150K given that the ARV is projected to be 200K. I'm curious to know if this type of loans are even realistic or common. Also what would be the standard term (if it exists) for this type of loan?

Thanks for all the feedback!

 This is a pretty standard fix and flip loan, with the caveat that the lender is going to hold the rehab/construction funds in escrow and pay them in draws as the work is completed. Only an idiot lender would give the borrower all of the money up front. 

To use your example: $100k purchase, $200k ARV, $50k rehab budget

The lender funds $80k-$90k at purchase and the borrower pays the rest in the downpayment. The lender then funds another $50k or so in draws (installments) as the rehab work is completed to pay for contractors and materials, with the maximum amount paid out by the lender capped at $150k.

This is an oversimplified example, but it should illustrate the concept. 

I have never heard the term "overfunding". If some guru is calling this kind of loan Overfunding, then either theyre a scammer trying to sell some course/mentorship/product garbage or they have no idea what theyre talking about.