Gap Financing For Real Estate Investors

Are you looking for an experienced and flexible partner to help fund your real estate deals? 

Efundingexperts is your Gap Financing solution. We all know that every entrepreneur is different. Every real estate business is unique, and every deal requires an appropriate approach. This is exactly why we don’t offer a one size fits all solution. Instead, we want to give you a variety of real estate investment loan options that you can choose from. We offer multiple types of funds and real estate investment loans, which works best for you and your business. 

When it comes to gap financing, refers to a form of financial loan. which covers time, funding, or negotiation gaps. It also known as Bridge Loan. This loan is used to finance the difference between the floor loan and the maximum permanent loan as committed. 

What is Gap Financing or Funding?

Gap financing is a short-term loan that helps people meet immediate financial obligations until they can arrange sufficient funds to finance long-term financial needs. Gap funding for real estate investors closes the remaining gap between a hard money lender covering and the cost of the investment project.

How Does Gap Financing Work?

Funding gaps are a common occurrence among very young firms. Those may underestimate the amount of capital required to maintain production until a viable cash flow is established. That’s why bank loan is the best solution. Investors or equity sales of funds needed to start operations and currently accessible funds can help bridge the gap.

Gap Financing provides short-term loans, which is usually repayable within six months or one year. It has high interest rates and high risk for lenders. This process will be applicable for someone who currently needs a lot of cash or will be needed in the future.

Disadvantages of gap funding

  • Since gap funding lenders face an elevated risk, they frequently levy a larger interest rate in comparison to banks. Their interest rates are usually 1% better than traditional mortgages.
  • Gap investment for real estate buyers isn’t always perfect for folks who need to flip a single deal.
  • Although not a popular practice, a few gap investment lenders request a percent of the proceeds from the sale of your funding properties.
  • Borrowers also can count on incurring extra fees including appraisal fees, notary prices, mortgage origination costs, management costs, title coverage costs, etc.

When should you use Gap Financing?

Every investor likes quick and easy access to cash. But it should be mentioned that every deal does not require real estate gap funding. Mentioned below are some of the situations in which gap funding should be used:

  • If you want to hold extra liquidity.
  • You don’t have enough cash available now to close a deal.
  • You don’t have sufficient money reserves to complete an unfinished project. 
  • You are eying high-end luxurious assets initiatives that allow you to in the long run deliver considerable returns.
  • Delays in a final agreement lead to increased interest payments. 

Gap funds have helped several investors to achieve their real estate goals. There is a right and a wrong time to use it. Efundingexperts strongly advise you to learn all about gap funding before you take the plunge. You should ideally explore other lending options before committing to a gap fund.

Gap Financing

Advantages of gap funding

Real estate investment funding is best suited for investors who flip this type of high-volume property. Here are some of the advantages of about gap funds:

  • Since these real estate finances cover the gap between the tough cash loan and the actual acquisition cost, it makes it viable for buyers to collect residences that they won’t have otherwise considered.
  • Gap cash may be used for greater than simply obtaining the property. It may be used to cover rehab fees and other incidental expenses.
  • Unlike traditional bank mortgages that require a variety of paperwork and take months to close, the hole investment may be obtained within a matter of days.
  • Gap funding for actual property traders is adapted for those who plan to undertake numerous property projects at once. In this scenario, gap funding alleviates the dangers you could come across from a behind-schedule sale or any other unexpected scenario which could gradually down the rehab process.
  • This investment allows a real property investor to put down the deposit on massive funding even as they may be expecting long-term financing to return back through.
  • Gap funding offers traders leeway to stay in an extra liquid position.

Why gap funding is so important?

When property traders discover an incredible investment opportunity. For example, a house that can be quickly renovated and then flipped for a large profit. They don’t go to banks for traditional mortgages. It’s not worth the time and expense, considering they have to turn it around in a few months and sell the house with a mortgage. Getting a traditional mortgage can take months. Banks have a pretty high bar for those who get a mortgage Investors need to move quickly and may not have the financial leverage to get approved for a traditional bank loan.

House flippers use hard money loans for their investments. Hard money loans are personal loans for investment properties, usually, taken from cash-rich individuals. Because they don’t keep the paperwork for a personal loan and the money can hit an investor’s account in less than a week.

Hard money loans carry interest rates of up to 20%. Which is much higher than average. After all, they rarely cover the full cost of acquisition and rehabilitation. Hard cash lenders want the investor to make investments in some of their cash in the project. So they have skin in the game. This is the same reason banks want residential buyers to put 20% down. So most hard money loans cover about 70% of the total project cost.

However, many investors may not have free cash that they can put into projects, or they simply don’t want to invest their own money. That’s why gap financing is needed.

 

Why choose us?

We don’t just want to see you as an investor, we want to be your partner. We always care about your business and we want to see you succeed. When efundingexperts offer a hard money loan for a real estate investment, we don’t just want to lend you the money and wash our hands with you. We want to guide you through each step of this procedure with our precious resources. Our group is here to provide crucial consulting services to assist save you money and time as you’re making vital decisions for your business.

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Phone: 833-568-4712

E-mail: Getmoney@efundingexperts.com

Address: 3501 Algonquin Rd. Suite 534

Rolling Meadows, IL 60008