Gap Funding: Is Covering Closing Costs Riskier Than You Think?

As a private lender, I get the following scenario presented to me almost daily. Let’s set the stage. Someone in your network wants to buy an investment property. Their loan provider requires them to bring a down payment and the closing costs to closing, so they come looking to you for the extra money.

You have the extra $20,000, so you can loan your cousin’s best friend the money as gap funding. After this conversation, people usually begin to reach out and ask how to do this, and usually, my answer instead asks why you want to do this.