Gap funding for fix & flips?

Question

I’ve heard about ‘gap funding’ for fix & flips to cover down/closing/holding costs in addition to the hard money loan for most of the purchase price & rehab, but how realistic is it to secure that type of funding?

Chris Seveney · Answer

@Travis Andres

If you do not have other assets to secure against - your best bet would be a private lender willing to take risk of essentially providing an unsecured loan.

There are people out there that do this - expect very high interest rates.

Tracy Tippett · Answer

There are a large variety of fix n flip programs that can be accessed if you have the right deal.  The real question is what is the expected profit margin on the flip and what sort of documentable experience do you have.

Mike Klarman · Answer

Next to 0 unless it is coming from a personal contact or a HELOC or something like that.  There is no national GAP funder outlet.  It's a risky loan because essentially it puts the investor leveraged out 100%.

John O'Leary · Answer

It's challenging to secure a Hard Money loan for fix and flips if you're considering a second lien position. Hard Money lenders prefer first lien positions during the rehab portion due to the enhanced security, control, and financial stability it offers. When you request a rehab draw, the lender will search for mechanics liens and see the second mortgage. This typically results in rehab funds being frozen until the second mortgage is lifted. As Chris outlines, if there is a private investor willing to lend the down payment funds secured via a promissory note, and not an attached lien, it is possible.

Erica Moore · Answer

Well I’m new to the idea as well but to me the hard money lenders that are a little pricey are open to up to 90% LTV second lien.I just feel both of those 1st and 2nd lender interest rate will be madness. But if the deal is worth it to get you going, just do it!!

I’m a mortgage broker so I always say this, to bring down that downpayment always get a partner that has a lot of hud experience and make him 10-19% owner on the LLC, that way you can use the experience and the partner don’t have to sign for the loan.

Austin Fowler · Answer

Would you be willing to borrow at 8%? I have experience raising capital for down payments if you are prepared to pay investors at this level.

Gap funding for fix & flips?

Most Popular Reply