In a Nutshell: Gauntlet Funding makes bridge or fix and flip loans to buy properties more accessible to real estate investors. The private lender has offices in New York and Florida and specializes in loans for single-family homes and small buildings that borrowers intend to resell or rent out. Alternatively, Gauntlet provides loans that allow landlords to reposition their debt even if they have credit issues after missed mortgage payments.
Investors who want to actively grow their wealth through real estate often consider buying and flipping houses. In 2019, flippers earned an average of 40.6% ROI, or around $65,000, per flip. A flip assumes that the home is bought and resold within 12 months.
Of course, there can be downsides to flipping homes. For example, investors can risk purchasing a property before a downturn and sinking money into renovations only to sell it at a loss. But if investors are savvy, they can make a profit quickly.
Flipping homes isn’t the only way to earn money in real estate. Potential investors can also buy properties in good shape, intending to become landlords.
Gauntlet Funding, with offices in New York and Florida, offers business loans that help real estate investors buy, sell, and flip homes. In fact, Lou Forino, Managing Director of Gauntlet Funding, and his brother Raffaele started as flippers themselves.
In 2008, Lou sold another business, and his brother, a mortgage lender, noticed the number of distressed homes that they could purchase cheaply and renovate quickly to sell or rent.
In the process of flipping houses, the brothers met many other people who didn’t have the funds to get started but were interested in fixing and flipping loans in Queens, Brooklyn, and other parts of New York City.
“We met a lot of real estate investors who were having trouble finding money for flips. Informally, we started lending to them. It hit a point where we wanted to formalize the business. At the end of 2013, we formed Gauntlet Funding to help these investors build wealth through real estate — the No.1 way wealth is built,” Lou told us.
Offering Fix and Flip or Bridge Loans
Gauntlet Funding primarily offers two types of loans: bridge loans and fix and flip loans.
A bridge loan is designed for those who want to purchase an asset — often a single-family home, small apartment, or multipurpose building — that doesn’t need considerable repairs. The bridge loan covers the price of purchasing the asset but not the repairs or architectural upgrades.
Alternatively, if real estate investors want to purchase an asset that needs work, they could opt for a fix and flip loan. These are typically nine- to 18-month loans that provide enough funding to purchase the property and pay for contractors and materials to renovate it.
“Their goal is to rent or sell the product. It was more common before 2019 to sell. Today, we are seeing a lot more investors hold on to assets,” said Lou.
Would-be borrowers interested in working with Gauntlet Funding can’t buy properties they intend to live in themselves. Instead, the private lender tends to work with LLCs. However, if clients don’t have an LLC status, the company can help them create one.
“As long as they don’t live there, we can help them put it into an LLC. It’s better for them from an asset and liability protection standpoint. If they’re living in the house, it’s not a fit for us,” Lou said. “Most of our loans are on one- to four-family homes that would be considered residential real estate. They are commercial loans on residential, mixed-use, and smaller apartment buildings.”
Gauntlet Funding primarily lends to borrowers who want to buy East Coast properties. Lou and his team can also offer advice on real estate markets in that region.
Loans Can Help Rebuild Investor Credit
Potential investors who seek loans through Gauntlet Funding should know that better credit will afford them a lower rate on the loan. However, individuals with credit challenges can still potentially get funding with them.
Lou’s company has helped many small property landlords improve their credit. These small-scale property owners may have missed a mortgage payment, especially in the last year, that ended up hurting their score. Some were particularly hard hit by the eviction moratorium when they couldn’t evict tenants who were not paying rent.
“If they have enough equity in the home, we can sometimes make a loan to take out their bank loan. Then, they can make interest payments for six or nine months and enroll in a credit repair program. The goal is to get them back into a low-interest, long-term loan,” Lou said.
Several debt forgiveness programs may appeal to those struggling to pay their mortgages. For instance, struggling landlords could enroll in one of the Department of Housing and Urban Development’s programs for mortgage debt reduction or reduced payments.
Lou suggested that a repositioning loan from Gauntlet Funding can help landlords improve their credit scores. That said, loans aren’t suitable for every business property holder struggling to make payments.
“We’ll only write a loan if we feel that it’s good for the borrower. We don’t want to put them in a worse situation in 12 months,” Lou told us.
Helping Clients Build Wealth Through Real Estate Investing
Gauntlet Funding can help investors flip houses or become landlords because real estate is a reliable investment. In most areas, home values have climbed every year since 2007. That means investors could typically buy a property anywhere, fix it up, and sell it for more than they paid for the home and the renovations.
Alternatively, some investors buy a property, wait a few months for it to accrue value, and then resell it.
Lou said that real estate investing has become an increasingly attractive option for his clients.
“We have newer people coming in, and we help them get started as a side hustle to build wealth. They often feel that 30 years in the corporate environment doesn’t get them to where they want to be,” he said.
He suggested that individuals without real estate experience should purchase a property they can afford with their salaries and cash reserves. It should be a property that requires limited renovations. Aspiring landlords or flippers could receive a 30-year, 3.75% interest loan from Gauntlet Funding, but they also need to have a high credit score. Would-be borrowers with lower credit scores should keep that in mind.
Potential investors should also keep an eye on the real estate market where they want to purchase or flip a property. Lou said that certain markets are seeing increases in home values of 25 to 40%, but appraisers don’t always keep up with home valuations markets move this fast. So, real estate investors should be prepared to handle an appraisal that may come in less than the investor believes it’s worth.
But savvy first-time home investors can purchase an asset they know will grow in value and add a viable new income stream to their portfolios.
“Real estate investing can diversify their income and assets,” Lou said.