Top Use Cases for Gator Lending in Real Estate Investing

In recent years, gator lending has become a reliable option for real estate investors who have found it difficult to raise money from traditional lenders.

Since Pace Morby launched the idea, gator lending has become popular and has taken various forms, meeting the needs of different real estate investors.  

In what follows, we highlight the top use cases for gator lending and how this creative financing technique can help your real estate business. 

Raising earnest money deposits

Since inception, earnest money deposit (EMD) financing has been a core of gator lending. 

Earnest money deposits have become a norm for residential and commercial real estate transactions in the US. 

Sellers use it to identify serious buyers and they will not schedule inspections or negotiate terms with potential buyers who can’t provide the EMD. 

Buyers also use EMD as a way to gain a competitive advantage. If the requirement is 5% of the purchase price, a buyer who values the property more than others can offer 10% to gain an advantage. 

Given the growing importance of EMD, real estate investors need to have a source that can provide them with EMD when they don’t have the cash to pay. 

This is where gator lending comes in. With it, investors can get the EMD required for the deal they are pursuing. 

Gator lenders like Duckfund will even provide EMD for multiple projects at once. The application process is also streamlined and fast (it can completed in 2 minutes), and funds are released within 48 hours without any credit report. 

This is a superior alternative to the stringent requirements and lengthy processes of traditional lenders. 

It is also more appropriate in competitive real estate markets where speed is a competitive advantage. With Duckfund, you can quickly get the EMD sorted and stand a better chance of clinching the deal. 

Accessing flexible financing arrangements

Pace Morby has expanded the concept of gator lending to include creating a community of real estate stakeholders. In these communities, participants can find educational resources, mentorships, and support. 

In addition, they can access flexible financing arrangements – both short-term and long-term. 

Community members can come together to purchase a property and share equity in it. They can sell it and share the profit or hold on to it for rental income. 

Also, if a community member does not have enough cash to pursue a deal, they can take a loan from another member (instead of sharing equity in the property). 

Community members can also form long-term business partnerships. 

The list of the types of financing that can be found in such communities is endless. 

Transactional funding for wholesaling

Real estate wholesalers find properties that are for sale, enter into a contract with the seller, and then go on to find a buyer. They use the money gotten from the final buyer to pay for the contract they had with the seller. 

Wholesalers make money from the difference between the price they agree with the seller and the final buyer. 

In recent times, double closing – where a wholesaler uses the money from the final buyer to pay for the contract they had with the seller – has been frowned upon by some states. 

Consequently, wholesalers have been turning to another solution – gator lending. This type of gator lending is also called transactional funding, flash funding, or same-day funding. 

The wholesaler will borrow money from the gator lender to purchase the property, sell the property immediately, and then pay back the loan immediately. 

Wholesalers usually have agreements with the final buyer before even purchasing the property. Consequently, the loan is often repaid on the same day or in a few days. 

Transactional funding is a good option for real estate investors who don’t have large capital to become flippers or developers. 

Whether it is EMD financing, access to a community of real estate investors, or transactional funding, gator lending continues to provide creative financing options for real estate investors. It remains to be seen how it will evolve further in the future.