Private Lenders and "Alligator Arms"

Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes

7mo

Sounds like it's not just me noticing that there seems to be a ton of "private lenders" everywhere who are just trying to re-broker every deal they can get their hands on. The number of deals that I see with 2-5 brokers in the chain is growing by the week. It's especially shocking when there are 4-5 hands in the pot and they all want 2 points each.

5 Reply

Doug SmithPro Member
OP
Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
7mo
Quote from @Patrick Roberts:

Sounds like it's not just me noticing that there seems to be a ton of "private lenders" everywhere who are just trying to re-broker every deal they can get their hands on. The number of deals that I see with 2-5 brokers in the chain is growing by the week. It's especially shocking when there are 4-5 hands in the pot and they all want 2 points each.

It's a real problem. We're getting the same thing. We'll refer to about 6 reliable smaller lenders...that's it. It makes us all look bad when these people claiming to be reliable lenders are either daisy-chaining or they fail to fund. I'm with you.
2 Reply

Christian Wamsley

Investor · Augusta · Member since 2024 · 28 posts · 23 votes

7mo

Doug — I feel this one.

From your seat, your reputation is on the line when someone says they’ll fund and then disappears. That’s not just frustrating — that’s costly. It makes everyone in the chain look unreliable.

I’m on the broker side, and I’m very upfront about that with borrowers and lenders. I don’t position myself as a lender, and I don’t commit funds that aren’t mine. Even then, I’ve had situations where a lender rep says one thing and underwriting shifts the goalposts late in the process. I do everything I can to set expectations properly, but when that happens, it still reflects on me — and it stings.

The daisy-chaining is the bigger issue. When you’ve got 3–5 hands in a deal all trying to grab 2 points, it’s not sustainable and it’s not fair to the borrower. If I ever co-broker, it’s clean and capped — and I’m not a fan of borrowers paying inflated fees because of someone’s distribution chain.

At the end of the day, capital only works when there’s clarity and follow-through. The lenders and brokers who consistently show up are the ones that last.

Appreciate you calling it out.

2 Reply

Nate Marshall
Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 736 votes
7mo
Quote from @Christian Wamsley:

Doug — I feel this one.

From your seat, your reputation is on the line when someone says they’ll fund and then disappears. That’s not just frustrating — that’s costly. It makes everyone in the chain look unreliable.

I’m on the broker side, and I’m very upfront about that with borrowers and lenders. I don’t position myself as a lender, and I don’t commit funds that aren’t mine. Even then, I’ve had situations where a lender rep says one thing and underwriting shifts the goalposts late in the process. I do everything I can to set expectations properly, but when that happens, it still reflects on me — and it stings.

The daisy-chaining is the bigger issue. When you’ve got 3–5 hands in a deal all trying to grab 2 points, it’s not sustainable and it’s not fair to the borrower. If I ever co-broker, it’s clean and capped — and I’m not a fan of borrowers paying inflated fees because of someone’s distribution chain.

At the end of the day, capital only works when there’s clarity and follow-through. The lenders and brokers who consistently show up are the ones that last.

Appreciate you calling it out.

I developed a tool called Daisy Chain Detector. It is one of the key tools in the RCIC ecosystem. It is quite good, In fact on a test property it told me it was a DR Horton home built in the last 4 years and gave me the 2 developments where this model was actually offered. Took less than 10 minutes.
0 Reply

Kenneth GarrettPro Member

Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes

7mo

@Doug Smith

From an investors perspective, I've been using private money for my BRRRR deals and a few flips for years. It's a great source for funds. Way too many people say yes and when it comes to actually fund something they bail at the last second. I use to have about a dozen lenders, but that has dwindled to a couple that I can rely on.

Just a quick story, I was purchasing a property to flip and a few days before the closing the lender pulled out. Things happen and I totally understand, but this could have been avoided had they been upfront from the beginning. I had to scramble to fund the deal.

I’m always careful about committing to a project unless I know for sure my private lender is committed. When they don’t fund it makes me look bad, my broker and anyone else involved.

0 Reply

Nate Marshall
Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 736 votes
7mo
Quote from @Kenneth Garrett:

@Doug Smith
From an investors perspective, I've been using private money for my BRRRR deals and a few flips for years. It's a great source for funds. Way too many people say yes and when it comes to actually fund something they bail at the last second. I use to have about a dozen lenders, but that has dwindled to a couple that I can rely on.
Just a quick story, I was purchasing a property to flip and a few days before the closing the lender pulled out. Things happen and I totally understand, but this could have been avoided had they been upfront from the beginning. I had to scramble to fund the deal.
I’m always careful about committing to a project unless I know for sure my private lender is committed. When they don’t fund it makes me look bad, my broker and anyone else involved.

They're not only trained properly if at all they are in for the get rich quick. Most are charging usuary rates to begin with. If they in fact close. Most don't.
0 Reply

Jacob Thorpe

Lender · Lake Geneva WI, USA · Member since 2023 · 141 posts · 72 votes

7mo

I need to expand my repertoire of private money lenders, I am a broker

0 Reply

Nate Marshall

Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 736 votes

7mo

Yes. Coming from one guru and organization. Suddenly all of those with no money can stack gator lenders up and burn them. Which most of them do. Not saying this is because of Pace or his top people but this has been watered down so much it is dangerous to say the least.

There needs to be a reckoning for this.

0 Reply

Ken M.

Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes

7mo

Quote from @Doug Smith:

We're seeing this happen more often as more people are becoming "Private Lenders". I own a mortgage company that, among other things, lends to investors. For the deals below $75K, we tend to refer them out to smaller private lenders. We usually go to the "known" private lenders first, but it seems we're getting contacted by more "private lenders" that took a course at the Holiday Inn last weekend from a guru that's never set foot in a lending job before. They agree to fund a deal then, when it comes time to fund, they ghost us. We, for one, are done referring to private lenders unless we know them or we see the money ready to go. Just a comment geared toward newer private lenders...you can't commit funds to a project unless you're truly ready to follow through. To our regular sources...I thank you...you seem to be rarer and rarer these days.

We know how to handle it and I'm not seeking advice, I am just ranting. I, for one, am over it. I know we have several regular commenters that are in a similar business to us on here that I feel we've become kindred spirits and I am sure will pile in.

Pace Morby, the same guy who says you can buy with no money down, and says you can borrow your closing costs from a "gator lender" ( is the term he uses) in his seminars and is going around signing up "gator lenders" (for a fee), people who don't have clue what they are getting into, probably has you on the list of sources.

0 Reply

Doug SmithPro Member
OP
Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
7mo
Quote from @Ken M.:

Quote from @Doug Smith:

We're seeing this happen more often as more people are becoming "Private Lenders". I own a mortgage company that, among other things, lends to investors. For the deals below $75K, we tend to refer them out to smaller private lenders. We usually go to the "known" private lenders first, but it seems we're getting contacted by more "private lenders" that took a course at the Holiday Inn last weekend from a guru that's never set foot in a lending job before. They agree to fund a deal then, when it comes time to fund, they ghost us. We, for one, are done referring to private lenders unless we know them or we see the money ready to go. Just a comment geared toward newer private lenders...you can't commit funds to a project unless you're truly ready to follow through. To our regular sources...I thank you...you seem to be rarer and rarer these days.
We know how to handle it and I'm not seeking advice, I am just ranting. I, for one, am over it. I know we have several regular commenters that are in a similar business to us on here that I feel we've become kindred spirits and I am sure will pile in.
Pace Morby, the same guy who says you can buy with no money down, and says you can borrow your closing costs from a "gator lender" ( is the term he uses) in his seminars and is going around signing up "gator lenders" (for a fee), people who don't have clue what they are getting into, probably has you on the list of sources.

I mentioned no names, but if those disciples with capital want an loan that's truly underwritten by someone with a formal credit background and 35 years under their belt, I'll work with them. I guess if these guys tell people what they want to hear instead of the truth people throw money at you. It would make me feel icky, but that's obviously not an issue for some of these guys.
0 Reply
Nate Marshall
Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 736 votes
7mo
Quote from @Ken M.:

Quote from @Doug Smith:

We're seeing this happen more often as more people are becoming "Private Lenders". I own a mortgage company that, among other things, lends to investors. For the deals below $75K, we tend to refer them out to smaller private lenders. We usually go to the "known" private lenders first, but it seems we're getting contacted by more "private lenders" that took a course at the Holiday Inn last weekend from a guru that's never set foot in a lending job before. They agree to fund a deal then, when it comes time to fund, they ghost us. We, for one, are done referring to private lenders unless we know them or we see the money ready to go. Just a comment geared toward newer private lenders...you can't commit funds to a project unless you're truly ready to follow through. To our regular sources...I thank you...you seem to be rarer and rarer these days.
We know how to handle it and I'm not seeking advice, I am just ranting. I, for one, am over it. I know we have several regular commenters that are in a similar business to us on here that I feel we've become kindred spirits and I am sure will pile in.
Pace Morby, the same guy who says you can buy with no money down, and says you can borrow your closing costs from a "gator lender" ( is the term he uses) in his seminars and is going around signing up "gator lenders" (for a fee), people who don't have clue what they are getting into, probably has you on the list of sources.

His programs run close to $10,000.00. He has a lady running his Top Tier TC which gives a piece of paper saying certified for $5,997.00.
0 Reply
Ken M.
Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
7mo
Quote from @Nate Marshall:

Quote from @Ken M.:

Quote from @Doug Smith:

We're seeing this happen more often as more people are becoming "Private Lenders". I own a mortgage company that, among other things, lends to investors. For the deals below $75K, we tend to refer them out to smaller private lenders. We usually go to the "known" private lenders first, but it seems we're getting contacted by more "private lenders" that took a course at the Holiday Inn last weekend from a guru that's never set foot in a lending job before. They agree to fund a deal then, when it comes time to fund, they ghost us. We, for one, are done referring to private lenders unless we know them or we see the money ready to go. Just a comment geared toward newer private lenders...you can't commit funds to a project unless you're truly ready to follow through. To our regular sources...I thank you...you seem to be rarer and rarer these days.
We know how to handle it and I'm not seeking advice, I am just ranting. I, for one, am over it. I know we have several regular commenters that are in a similar business to us on here that I feel we've become kindred spirits and I am sure will pile in.
Pace Morby, the same guy who says you can buy with no money down, and says you can borrow your closing costs from a "gator lender" ( is the term he uses) in his seminars and is going around signing up "gator lenders" (for a fee), people who don't have clue what they are getting into, probably has you on the list of sources.

His programs run close to $10,000.00. He has a lady running his Top Tier TC which gives a piece of paper saying certified for $5,997.00.

Did you see this? Apparently, it's just starting to hit the fan. Expect more.
Meanwhile, In One Part of Florida - 32 foreclosure lawsuits linked To SubTo Community
https://www.news4jax.com/news/local/2026/01/29/mortgage-gamb...

0 Reply
Nate Marshall
Real Estate Consultant · Evergreen, CO · Member since 2018 · 1k+ posts · 736 votes
7mo
Quote from @Ken M.:

Quote from @Nate Marshall:

Quote from @Ken M.:

Quote from @Doug Smith:

We're seeing this happen more often as more people are becoming "Private Lenders". I own a mortgage company that, among other things, lends to investors. For the deals below $75K, we tend to refer them out to smaller private lenders. We usually go to the "known" private lenders first, but it seems we're getting contacted by more "private lenders" that took a course at the Holiday Inn last weekend from a guru that's never set foot in a lending job before. They agree to fund a deal then, when it comes time to fund, they ghost us. We, for one, are done referring to private lenders unless we know them or we see the money ready to go. Just a comment geared toward newer private lenders...you can't commit funds to a project unless you're truly ready to follow through. To our regular sources...I thank you...you seem to be rarer and rarer these days.
We know how to handle it and I'm not seeking advice, I am just ranting. I, for one, am over it. I know we have several regular commenters that are in a similar business to us on here that I feel we've become kindred spirits and I am sure will pile in.
Pace Morby, the same guy who says you can buy with no money down, and says you can borrow your closing costs from a "gator lender" ( is the term he uses) in his seminars and is going around signing up "gator lenders" (for a fee), people who don't have clue what they are getting into, probably has you on the list of sources.

His programs run close to $10,000.00. He has a lady running his Top Tier TC which gives a piece of paper saying certified for $5,997.00.

Did you see this? Apparently, it's just starting to hit the fan. Expect more.
Meanwhile, In One Part of Florida - 32 foreclosure lawsuits linked To SubTo Community
https://www.news4jax.com/news/local/2026/01/29/mortgage-gamb...

Yes. I am doing deep research tomorrow using RCIC on this.
1 Reply

Steve HiltabiddlePro Member

Lender · Pennysylvania · Member since 2018 · 139 posts · 68 votes

7mo

@Doug Smith Thank you for sharing this particular situation based on your experience. I happen to be the type of private lender you mention. And while I learned over a weekend, the education I received was from a very reputable team who had over 6,000 loans under their belts and they opened their books on how they lend.

I mostly work with local investors, work hard for repeat business and one thing I tell any investor I speak to is I will never commit to funding a deal that I don't intend to fund. Thankfully, the only deals that I worked on that didn't close was the result of the investor themselves or the seller. I take great pride in knowing I've always funded when I said I would. I've participated in hundreds of transactions and feel my word to deliver funds as promised as one the most important things I do.

It's interesting that you mention the increase in folks becoming 'private lenders' as I feel similar vibes. My local REIA recently had a Saturday 'workshop' about being a private lender. That struck me as curious.

You've been in the business longer than I have but I have learned to always trust but verify. I goes for borrowers, it goes for deals, it's goes for lenders. After this post, I'll be keeping my eyes and ears open even more to see if there are more folks promising lending who may have little to know experience and more importantly, money.

Steve

1 Reply

Doug SmithPro Member
OP
Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
7mo
Quote from @Steve Hiltabiddle:

@Doug Smith Thank you for sharing this particular situation based on your experience. I happen to be the type of private lender you mention. And while I learned over a weekend, the education I received was from a very reputable team who had over 6,000 loans under their belts and they opened their books on how they lend.
I mostly work with local investors, work hard for repeat business and one thing I tell any investor I speak to is I will never commit to funding a deal that I don't intend to fund. Thankfully, the only deals that I worked on that didn't close was the result of the investor themselves or the seller. I take great pride in knowing I've always funded when I said I would. I've participated in hundreds of transactions and feel my word to deliver funds as promised as one the most important things I do.
It's interesting that you mention the increase in folks becoming 'private lenders' as I feel similar vibes. My local REIA recently had a Saturday 'workshop' about being a private lender. That struck me as curious.
You've been in the business longer than I have but I have learned to always trust but verify. I goes for borrowers, it goes for deals, it's goes for lenders. After this post, I'll be keeping my eyes and ears open even more to see if there are more folks promising lending who may have little to know experience and more importantly, money.
Steve

Thanks for responding. I actually did a webinar a couple of years ago for Advanta IRA about private lending from one's SDIRA as part of their educational series. I hear from different IRA custodians that they can't say anything about the investments that people make in their SDIRAs, but that they often see folks making some pretty foolish decisions. I see we're already connected. I hope to chat someday soon.
2 Reply

Chris SeveneyBusiness Member

Moderator

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

7mo

This is why we don't even refer deals to anyone anymore. If we can do the deal, we will do it. If we can't, we just say we can't do it.

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Private Lenders and "Alligator Arms"

Private Lenders and "Alligator Arms"

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