Dave Knudson Gravity Capital. Today we are talking about bridge funding.
What is bridge funding? That’s what we do. What types of bridge funding are there? Here’s what we do, let’s say that there are probably 5 or 6 different types of bridge funding. The first one is used for this purpose, which is to purchase a piece of real estate. We have a lot of investors that come to us who want to buy real estate and often times they’re getting tremendous deals. They’re getting deals because they can provide cash fast. When you can provide cash fast, you can sometimes get a great deal.
Banks take a long time, they need appraisals, they need credit reports they need all kinds of stuff. So, if you can get in a transaction quickly, that’s what we’re trying to accomplish here in Gravity Capital, that’s what we charge more by the way, because people need the money quicker, that’s how we generate our profit.
Perfect example I would say is a guy named Kent. He came to us a few years back and had under contract for two years, oddly enough, some land in Bakersfield, California. He put them under contract for $1,000,000, he had this tied up for one year, that was about two years ago. So he came to us right at the end, it’s hard to get financing on land sometimes. Kent came to us, he had some extra collateral, he came and within a couple of days, two days before his contract expired we funded this $2,000,000 transaction.
It was kind of a crazy deal because Kent is a full time developer, he went through the crash, lost a lot of money, came back, had this tide up, bought it for a million dollars. We lended to him thinking that it was a hell of a deal and within 30 days, Kent had sold this for $2,000,000 cash. We charged $150,000, that was Gravity’s profit, Kent made the rest which was $850,000. And you would say $150,000 in 30 days was a good profit, but Kent couldn’t get the money anywhere else and he made that much. So in this transaction Kent didn’t mind paying us.
The second reason we do a lot of bridge funding is for Business Ventures. We have a lot of people coming with ideas of how to buy and build businesses. One person in particular was a guy by the name of Hans. He had a ranch outside of Pennsylvania. It was a huge house, the house was about 12,000 square feet, he had a huge bar, he had conventions, he had banquets, he had weddings, and he did pretty well off his facility. But Hans had a venture where he was putting some capital under a venture in Europe. He was from Germany, so we were able to lend Hans $400,000, secured by this banquet facility in Pennsylvania. Hans hasn’t paid this back yet, but it was a deal where he couldn’t borrow from the bank.
Another thing we lend money for oftentimes is for rehab, fix up and repairs. Sometimes it’s hard to borrow money on property that needs to be fixed up. Perfect example of this one, which we don’t do very often but every now and then we do, was a guy by the name Ed came to us. He actually operated a church. The church had a lot of equity in it but the church needed to be fixed up. It needed a couple hundred thousand dollars, we thought the church was worth at least $500,00 and we were able to lend him $200,000. Again, it’s really hard to finance churches sometimes, he’s been paying us well ever since.
Development is also hard to finance, perfect example of this is a guy named Danny who came to us and had a piece of property in Georgia, that had about 50 lots on it. When he came to us he needed to finish the development, he needed to work on some roads, some curbs and gutters, and build a couple of houses. He came to us and we were able to lend him $600,000. That’s a perfect example of when a bank was not able to finance.
At the moment we have not made a whole lot of these, but every now and then you’ll find someone who’s in foreclosure that needs money to pay off their property before they get foreclosed on. There’s no equity in this transaction, we would be happy to do it, so that’s another bridge funding predicament.
Keep in mind 50% on the value is the key, you want to make sure you have enough equity. Bridge Funding, these are some of the things that we do. Keep us in mind at Gravity Capital, thank you.
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