Amazing New Program for New Investors????

Professional · Huntingdon Valley, PA · Member since 2016 · 8 posts · 0 votes

So the program seems pretty simple to me especially for someone starting out with not much capital that would allow them to be part of a flip. Yes I know there are hard money lenders but this does not appear to be a loan and would allow you to hedge the risk with little money down with an experienced real estate company. Seems like a win/win to me and I'm curious as to what other people thing about this route.

Gorilla Capital provides 90% of acquisition and remodel costs
Fix & flip operator provides remaining 10% of acquisition and remodel costs
Gorilla Capital charges a monthly 1% management fee for capital in use
Fix & flip operator earns 12% per annum on their capital in use
Remaining net profit is split 50/50 upon closing

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Account Closed

Rental Property Investor · Portland, OR · Member since 2015 · 338 posts · 332 votes

10y

I don't see how a lender who charges 12% interest, takes half your profit, and THEN owns the property 100% after all the work is completed by their lendee (who by the way still has to put up 10% of the project) would be considered "too good to be true."

It's a different business model--one that some might call "disruptive"--but they're not giving anything away for free. You're essentially their bird dog, agent, and contractor all rolled into one, and you just paid THEM for the privilege. But for people in expensive markets who don't have the 25% LTC DP that HMLs want to see (which keep in mind is less than the 25% LTV that most conventional banks want), it could be a way for more beginner flippers to build capital.

Personally, I'd be a little concerned about giving up all control over the property. I'm pretty opinionated about design decisions and know my neighborhoods well. In addition to dictating the choices you make as the rehabber/remodeler, a company that owns the property could simply decide to hold the property and give you whatever they say it's worth. Not saying this company would do that, but they could. Also with this model, you ONLY have the one exit strategy. If the market shifts by the time you're done with the rehab, you can't hold the property--you'd have to take a loss. That's a lot of time invested to relinquish all control yet still take on significant risk.

All that said, if I were a flipper starting out, and despite all these considerations, it's still one funding strategy I'd look into, in addition to others, if I didn't have private money or personal capital.

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Joe SplitrockPro Member
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
10y
I am skeptical. I have no specific experience or knowledge of this group, but a capital group that wants to work with new investors strikes me as odd. New investors lack experience, so why does this group want to take a risk on someone with no track record?
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Chris P.
OP
Professional · Huntingdon Valley, PA · Member since 2016 · 8 posts · 0 votes
10y
My guess is looking to grow their business into new locations nationwide through these types of partnerships. I don't believe they would work with a new wet behind the ears investor but investors that have experience but just lack the capital for a specific project.
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Austin Mudd
Real Estate Agent · Los Angeles, CA · Member since 2015 · 149 posts · 75 votes
10y
Took the liberty to google them and found this: http://gorillacapital.com/wp-content/uploads/2015/..
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Chris P.
OP
Professional · Huntingdon Valley, PA · Member since 2016 · 8 posts · 0 votes
10y
Austin, I've seen this as well. What is your opinion of the program as presented?
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Austin Mudd
Real Estate Agent · Los Angeles, CA · Member since 2015 · 149 posts · 75 votes
10y
@Chris P. No expert here by any means, but looks like a typical equity partnership seen in commercial development. Except usually it's something something like 90-10 investor/developer pari passu up to 12% returns, then the developer's promote hits a threshold and increases to 80-20, 70-30 etc. as % return increases past 12%
But GC is offering 50% split on profits while it looks like they're going to be doing more hand-holding? Seems like a good gig... Plus you have a firm underwriting your deals.
edit: "Every property is titled under a unique LLC, which is owned 100% by Gorilla Capital."
Noticed that, does that mean you're not a partner in the LLC?
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Claudia Fernandez
Investor · Linden, NJ · Member since 2016 · 84 posts · 11 votes
10y
Originally posted by @Austin Mudd:

@Chris P. No expert here by any means, but looks like a typical equity partnership seen in commercial development. Except usually it's something something like 90-10 investor/developer pari passu up to 12% returns, then the developer's promote hits a threshold and increases to 80-20, 70-30 etc. as % return increases past 12%
But GC is offering 50% split on profits while it looks like they're going to be doing more hand-holding? Seems like a good gig... Plus you have a firm underwriting your deals.
edit: "Every property is titled under a unique LLC, which is owned 100% by Gorilla Capital."
Noticed that, does that mean you're not a partner in the LLC?
I don't think you are partner at all. How would this work? Not sure I would be comfortable w something like this.
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Chris P.
OP
Professional · Huntingdon Valley, PA · Member since 2016 · 8 posts · 0 votes
10y
@Claudia Fernandez you find the project, if it meets certain requirements, they'll fund 90% of it. The goal is to fix and flip in 120 days. For a 10% investment you could stand to make a nice ROI with the right project. I'd be curious to look over their contract though cause if the property is under their control after purchase they could do what they want with it.
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Claudia Fernandez
Investor · Linden, NJ · Member since 2016 · 84 posts · 11 votes
10y
Originally posted by @Chris P.:

@Claudia Fernandez you find the project, if it meets certain requirements, they'll fund 90% of it. The goal is to fix and flip in 120 days. For a 10% investment you could stand to make a nice ROI with the right project. I'd be curious to look over their contract though cause if the property is under their control after purchase they could do what they want with it.
It def sounds too good to be true. Let us know what you find out.
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Austin Mudd
Real Estate Agent · Los Angeles, CA · Member since 2015 · 149 posts · 75 votes
10y
@Logan Drew Would you have any input on this?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Chris P. @Austin Mudd Gorilla is a Eugene based company as their data shows..
program I am sure is real.. I know John the owner personally.. ( He almost bought into my airplane)
they entered the foreclosure space at the perfect time .. they used to only do court house steps for them in house.. this would be a natural progression for them.
If the terms work and you like working with them its for real for that I can assure you. So anyone answering on this thread that says it sounds to good etc etc.. that's just a guess and typical BP negativism.. LOL.
they will have to kiss a ton of frogs doing this with newbies.. but they mitigate the down side by having folks have skin in the game. I would certainly do this WAY before I signed up for deal like with a company like DOhardmoney ... John is not out to rip a couple grand from you he wants to put money out.
And I have no affiliation other than a coincidence last e mail I had with john was a year ago and he did not mention this model.
good luck with it.
you will find them to be pretty structured in how they do business on the deal side.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Chris P. keep in mind also that with then owning the asset and making 12% right off the top if you miss your target on resale value , time or , sale price your probably wiped out and they make at least their 12%... one would hope that there people vette you hard enough that this does not happen.
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Claudia Fernandez
Investor · Linden, NJ · Member since 2016 · 84 posts · 11 votes
10y
Originally posted by @Jay Hinrichs:

@Chris P. @Austin Mudd Gorilla is a Eugene based company as their data shows..
program I am sure is real.. I know John the owner personally.. ( He almost bought into my airplane)
they entered the foreclosure space at the perfect time .. they used to only do court house steps for them in house.. this would be a natural progression for them.
If the terms work and you like working with them its for real for that I can assure you. So anyone answering on this thread that says it sounds to good etc etc.. that's just a guess and typical BP negativism.. LOL.
they will have to kiss a ton of frogs doing this with newbies.. but they mitigate the down side by having folks have skin in the game. I would certainly do this WAY before I signed up for deal like with a company like DOhardmoney ... John is not out to rip a couple grand from you he wants to put money out.
And I have no affiliation other than a coincidence last e mail I had with john was a year ago and he did not mention this model.
good luck with it.
you will find them to be pretty structured in how they do business on the deal side.
LOL not trying to be negative at all. Just stating what everyone else is thinking. Giving someone 90% of the funds to fix a property and then splitting profits 50/50, YES that def sounds too good to be true. But all in all, I know nothing more about this proposal and really hope someone sheds more light.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Claudia Fernandez its really not.. there are many that do this.. most of your private deals are capital partner work partner.. I do it every day.. and I fund 100% and split profit..But I don't advertise it and I only work with my select core of folks that can do volume. I have no interest in the onezee twozee flipper.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Claudia Fernandez I can 1000% assure you this is a for real company.. they are located in Eugene Oregon. .I have been in their office.. One of my business partners wife used to work for them.
My wife used to list their Vancouver stuff..
BP usually has this too good to be true bent by those that have no first hand knowledge.. And I am guilty of that for sure as well. we all want to protect others.
But in this instance and you don't see me RA RA ing on BP.. but this is a for real company.
Whether the numbers work on the deals is another thing.
the down sides are
Normal risk anyone would take doing a flip.. other than bringing in your own capital partner that shares the risk
the way this is set up ... with 10% of your cash and then the company takes 1% a month.. not likely they will take a loss.. but if it does not go correctly you could end up with making no money or losing.. but that's the case in any of these deals.
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Logan Drew
Flipper/Rehabber · Pittsburgh, PA · Member since 2014 · 144 posts · 21 votes
10y
Originally posted by @Austin Mudd:

@Logan Drew Would you have any input on this?
I'll review the thread. If it says Gorilla owns 100% of the LLC on title, then there is your answer. I'd be curious to read through and possibly speak to anyone that has used them before. Let's catch up soon.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Logan Drew I know these guys very well and personally... its simply a JV model it is not a lending model.
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Account Closed
Rental Property Investor · Portland, OR · Member since 2015 · 338 posts · 332 votes
10y
I don't see how a lender who charges 12% interest, takes half your profit, and THEN owns the property 100% after all the work is completed by their lendee (who by the way still has to put up 10% of the project) would be considered "too good to be true."
It's a different business model--one that some might call "disruptive"--but they're not giving anything away for free. You're essentially their bird dog, agent, and contractor all rolled into one, and you just paid THEM for the privilege. But for people in expensive markets who don't have the 25% LTC DP that HMLs want to see (which keep in mind is less than the 25% LTV that most conventional banks want), it could be a way for more beginner flippers to build capital.
Personally, I'd be a little concerned about giving up all control over the property. I'm pretty opinionated about design decisions and know my neighborhoods well. In addition to dictating the choices you make as the rehabber/remodeler, a company that owns the property could simply decide to hold the property and give you whatever they say it's worth. Not saying this company would do that, but they could. Also with this model, you ONLY have the one exit strategy. If the market shifts by the time you're done with the rehab, you can't hold the property--you'd have to take a loss. That's a lot of time invested to relinquish all control yet still take on significant risk.
All that said, if I were a flipper starting out, and despite all these considerations, it's still one funding strategy I'd look into, in addition to others, if I didn't have private money or personal capital.
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Claudia Fernandez
Investor · Linden, NJ · Member since 2016 · 84 posts · 11 votes
10y
Originally posted by @Jay Hinrichs:

@Logan Drew I know these guys very well and personally... its simply a JV model it is not a lending model.
How is it a joint venture if it seems they own 100% of the property?
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Claudia Fernandez
Investor · Linden, NJ · Member since 2016 · 84 posts · 11 votes
10y
Originally posted by @Account Closed:

I don't see how a lender who charges 12% interest, takes half your profit, and THEN owns the property 100% after all the work is completed by their lendee (who by the way still has to put up 10% of the project) would be considered "too good to be true."
It's a different business model--one that some might call "disruptive"--but they're not giving anything away for free. You're essentially their bird dog, agent, and contractor all rolled into one, and you just paid THEM for the privilege. But for people in expensive markets who don't have the 25% LTC DP that HMLs want to see (which keep in mind is less than the 25% LTV that most conventional banks want), it could be a way for more beginner flippers to build capital.
Personally, I'd be a little concerned about giving up all control over the property. I'm pretty opinionated about design decisions and know my neighborhoods well. In addition to dictating the choices you make as the rehabber/remodeler, a company that owns the property could simply decide to hold the property and give you whatever they say it's worth. Not saying this company would do that, but they could. Also with this model, you ONLY have the one exit strategy. If the market shifts by the time you're done with the rehab, you can't hold the property--you'd have to take a loss. That's a lot of time invested to relinquish all control yet still take on significant risk.
All that said, if I were a flipper starting out, and despite all these considerations, it's still one funding strategy I'd look into, in addition to others, if I didn't have private money or personal capital.
Thank you for this! Really helps put things into perspective. I wondered why not try and get a Fannie Mae home style Reno loan, they provide the repair money and your only putting 5% and the property is yours 100%.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Account Closed you can have a JV agreement that calls for the money to be in title ..
But in essence your working as Dani said for the Money person and your putting some of your money at risk.. And if you have very limited capital and want in the game this is a good way to get started .. I actually see Gorilla having far more risk in this than the ground partners.
1. people that use this will generally be limited capital limited experience.
2. risk of deal going sideways is huge with newer or non experienced folks.
so Gorilla needs big upside.. and of course you don't know what they will put their money into .
Many first time flippers really cant run the numbers well and they propose all sorts of deals that are DOA to start with...
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Account Closed
Rental Property Investor · Portland, OR · Member since 2015 · 338 posts · 332 votes
10y
@Claudia Fernandez it's been a while since I looked into the HomeStyle loan, but I'm pretty sure it's for first time owner-occupants? There are lots of reasons why a conforming loan (much less an owner-occupant loan) wouldn't work for flippers.
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Claudia Fernandez
Investor · Linden, NJ · Member since 2016 · 84 posts · 11 votes
10y
Originally posted by @Account Closed:

@Claudia Fernandez it's been a while since I looked into the HomeStyle loan, but I'm pretty sure it's for first time owner-occupants? There are lots of reasons why a conforming loan (much less an owner-occupant loan) wouldn't work for flippers.
No, its not for owner occupants or first time home owners anymore.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Account Closed the other reason this model works for those with the MONEY is
they do not have to go through the NMLS stuff that lenders have to do in 18 states so they can go nationwide with no regulatory issues.
and being a Eugene based company they would have to be NMLS licensed to make any rehab loans in any state in the US... just like I was for all those years.
they are very active in Oregon.. especially the rural counties.. its were they got their start.
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Brian Baker
Professional · Clermont, FL · Member since 2014 · 23 posts · 14 votes
10y
Just putting in my two cents here... I looked at Gorilla Capital's slides and ran some calculations. Their slides do not take into account any buyer's side closing costs for purchasing the property, unless they're wrapped into the Acquisition Cost. Their Sale Cost only accounts for realtor commissions of 6% on the sales closing. If I've got that wrong, please correct me; I'm here to learn also.
Typical closing costs in FL are usually about 2.5% from the buyer, and the seller usually pays 2% plus 6% in realtor commissions, for total closing costs of about 10.5%. If those additional closing costs are accounted for, the profit to the Operator is really closer to $9,675 and closer to $16,075 for Gorilla.
Compare this to a hard money lender that wraps in the repairs costs on the same deal (2 points, 12% interest, $250 appraisal fees), where the Operator's profit would be about $13,167. Or how about business credit lines (which I prefer to use for a variety of reasons; see 10BillionCash.com for more details), where the Operator's profit would be about $11,635.
Bottom line: Always run your numbers. Know what works best for you and your needs. Gorilla Capital may be just fine to use if they fit your criteria (profit margins, availability of funds, project restrictions, rates, etc.). If not, there are plenty of other ways to get funded out there, even if you're new to investing.
Good luck and happy investing!
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Behrooz K.
Spring Valley, NY · Member since 2016 · 55 posts · 21 votes
10y
I agree with @Account Closed This is definitely not too good to be true. Look at the bottom line on the example they give in their program overview. You're left with just 14k profit after 3-6 months of dealing with contractors, and that's assuming everything goes as planned. If you had done this with hard money lenders you would have kept the whole 28k of profits, which would make sense.
I guess this is good if you don't have the %20 to put down, which is what most hard money lenders require. Another plus is on page 6 they mention : "We can handle all wire transfers of purchase funds to the clerk of court, trustee, or escrow company. We also generate a proof of funds for REO/ short sale purchases."
This is something hard money lenders don't do, at least not the ones I've spoken to. Therefore, this will open up a lot of potential REO deals which would otherwise not be an option if you don't have the funds.
In their sign up form, they do ask about your flipping experience. So not sure if they take complete beginners.
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