The Gator Lending Strategy

Gator Lending Strategy lead

September 13, 2023




Gator Lending, a term coined by creative real estate entrepreneur Pace Morby, has been called a low-barrier, easy entry into RE investment. But is it safe to take a bite, or is it a case of ‘Later Gator’? We take a look.

How it works

It is easier. You don’t have to go out and find deals. You don’t have to own a deal. You don’t need a license. You don’t even have to have money (just a line of credit). What a “gator” does is take chunks from other flipper’s deals. Typically that means providing a small, short-term loan to the actual flipper to fund their earnest money deposit (EMD), or origination fee, probate fee, or transactional money on a double close wholesale deal.

Money lenders aren’t going to step in for these bite-size amounts–say, $4,000–but gators can. Since access to this money can make or break a deal for a flipper, you have leverage to negotiate a good return. You can ask for a multiple of your money back. While $6K back on a $4K loan is not a fortune, a few quick transactions this size can start to add up. And your secondary goal is also valuable: strategic networking, experience, and relationships within the real estate industry.

The process

Pace’s process: Start by analyzing location and market trends to identify areas with growth potential. Now join a local flipper Facebook group and say, “Hi, I’m new to the group. I can help you. I can turn a dead deal into a live deal by providing the transactional cash you need to get it over the line. Get in touch.” Set up a nice website from a Wix template, and add Calendly so people can set calls with you. If you don’t actually have the money, open a line of credit with a bank, lend off that, and grow that credit line. Now, start making deals.

The critical thing, Pace stresses, is to have the right legal paperwork to protect your deals. That means having solid, attorney-drafted contract and documents, prepped by a counsel familiar with lending rules and policies. Don’t Zelle someone money: the loan should go through the title company. It’s worth connecting with the title company directly to feel them out—after all they are the ones protecting your funds.

What could go wrong?

While Gator lending has been promoted as an easy entry into real estate, be aware that you don’t get to secure your loan with real estate when the loan money is used as a deposit before the purchase is closed. Not to mention, you get no equity to offset the loan, meaning the loan to value (LTV) is 100%.

What could go wrong? Since the borrower didn’t even have the EMD, you know they are stretched to the max. Imagine you lend them the EMD, but they realize they’re broke and don’t go through with the deal. The EMD may be lost because they didn’t have a valid cancellation reason, or missed the deadline or failed to notice it was non-refundable. Even borrowers you know and trust can run into such problems.

For all your protecting, attorney-drafted documents, you’d still have to go and enforce that contract, which could be like squeezing juice from a stone. Still, if you recognize the networking and experience value, you might feel the occasional bust is worth it. 


This article is for informational purposes only and is not legal, financial or investment advice. To obtain advice tailored to your particular circumstances, you should consult a licensed professional advisor.

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