Gap Funding - Just Starting

[Jaquon Miller]

Have 100k sitting and a few real estate investors in my network who have inquired as to whether I’d be interested in helping to fund their down payments for fix & flips. 

Should I do this as individual vs entity and what are market rate terms? Should I be looking for interest and a % of the profits?

[John O'Leary]

If the investor is using a HML, offering a second position may be challenging as most lenders prefer to be the sole lien holders. For example, say the investor is requesting funds for a rehab draw and they utilized a GAP loan. This could potentially lead to complications such as frozen funds when mechanics liens are searched and they see the 2nd lien. However, if you're open to a silent second position via a promissory note, it may be feasible.

Determining whether to invest as an individual or entity is a question best addressed by your attorney and CPA. In my experience offering GAP loans, I typically charged between 12-15% interest and 3 points due to the loan size. Bridge loan rates have ranged from 8-12% depending on market conditions and the cost of capital.