The quest for creative financing in the real estate market has led to the popularity of gator lending. Since its launch by Pace Morby, gator lending has provided a source of alternative funding for real estate investors.
Today, gator lending is defined in different ways and the scope of its usage varies from one investor to another.
In what follows, we consider three ways gator lending has been defined and how CRE investors can benefit from each of them.
Gator lending as earnest money financing
Pace Morby first used gator lending as a way for investors to borrow the earnest money deposits they needed to pay before they could inspect and negotiate properties of choice.
In today’s real estate market, sellers and their agents use earnest money deposits (EMD) to separate serious buyers from unserious ones. They do this so they can quickly sell their properties instead of wasting time on those whose interests are not serious or genuine.
Paying EMD is a well-established norm in the US CRE market. Before you even start looking for the funds to close a property, you must have the cash to pay for EMD.
Since many investors don’t have the needed cash, gator lending has provided an alternative source to traditional bank loans (with their stringent requirements and delays). A company like Duckfund will provide EMD financing in just 48 hours after a successful application (which takes just 2 minutes) without requesting a credit report.
If you are a CRE investor, you can tap into gator lending in the form of earnest money financing to raise the EMD you need to pursue deals. Duckfund will even provide you with EMD funding for as many deals as you want.
Gator lending as transactional funding
Transactional funding, also called flash funding, is a system where wholesalers can borrow to purchase a property, sell the property immediately, and then repay the loan on the same day (or in a few days at most).
Wholesalers are mostly real estate investors who don’t use their cash but depend on making money from their negotiation skills – negotiate a lower price with the seller and a higher price with the seller.
Of course, wholesaling is risky and this is why most wholesalers ensure that they have a ready final buyer before they go on to buy the property with the transactional funding.
If you are a CRE wholesaler, you can use gator lending in the form of transactional funding as an alternative to double closing – selling a property you don’t own and then using the money to buy the property at a lower price – which is now becoming illegal in certain jurisdictions.
Gator lending and the Gator method
Pace Morby has extended gator lending to include the concept of building communities of real estate stakeholders that can provide education, mentorship, training, and financing to one another.
In these communities, you can forge long-term partnerships, seek short-term financing, and collaborate with other members on various projects. The focus is having a pool of trustworthy people who can help each other achieve their real estate goals.
If you are a CRE investor interested in creative financing, you will find many opportunities in such communities. Beyond financing, you can find mentors and mentees and those who can support you in various circumstances.
Earnest money financing remains the most useful iteration of gator lending to CRE investors. Most transactions require them; it doesn’t matter whether you are a flipper or a long-term investor or if you are buying data centers or warehouses.
As the market becomes more competitive, only those who can quickly and consistently source EMDs can build profitable portfolios. Don’t be left out.