In Costa Rica, pursuing a traditional bank loan can be extremely time-consuming, expensive, with double digit interest rates and require and an enormous amount of paper-work. Gap Investments provides loans for 1-3 year terms, therefore filling the “gap” quickly and efficiently for qualified borrowers looking for short-term solutions.
Gap Investments has well-trained professionals acting in the best interest of borrowers and the investors we represent. The industry has changed significantly over the last decade and Gap Investments has emerged as a conduit for you to access qualified investment opportunities.
What are some of the ways I can participate in a private/hard money loan?
There are many ways you can participate in a private money loan transaction. You can fund a new loan, buy an existing loan, invest in a mortgage pool, or combine your investments in a fractionalized note with other investors.
Why do they call it “hard money”?
The term “hard money” is used in conjunction with a loan which is “hard to get” from a traditional lending source, such as a bank. The term also comes from the asset pledged as collateral in return for the loan. When a borrower pledges the asset as collateral, the asset goes “hard” as collateral against the loan.
The terms Equity Lending and Private Money Lenders are more acceptable and descriptive of the professional lending practices in place today. Private parties funding loans, individually, or as a group, for transactions has now become an accepted form of financing given the challenges provided by the Costa Rican banking environment.
Who will be involved in the process of investing or purchasing a private/hard money note?
Multiple parties are involved from origination through to closing. In addition to yourself, your legal representative and Gap Investments are the only ones involved in the process.
Is Loan to Value (LTV), the best criteria to use when investing in private money loans?
Yes. Gap Investments appraises the property and checks all issues associated with the property, such as cash flow for commercial properties, liens, taxes, etc.
Aren’t private/hard money loans more expensive for borrowers?
The issue with private money loans is not so much that they are more expensive, but that they are readily available. Private money lenders in Costa Rica can and do, compete with banks. Applying for a traditional bank loan can be a lengthy and tedious process.
What are the closing costs to the investor on a private/hard money loan investment?
There are no costs to the lender — the borrower pays closing costs.
Foreclosure – Gap Investments is pleased to say, that since its inception in 2008, there have been no foreclosures to date! WHY? Because we only do loans under 60% Loan to Value.
Legal/Advisory Fees – We can recommend reputable lawyers that specialize in facilitating loans. They have the ability to close quickly and are cost efficient. Unfortunately, using your own lawyer that does not specialize in loans, makes the process far more complicated than it needs to be. This causes undue delays and unnecessary costs for the borrower.
Do private money loans only cater to desperate or risky borrowers?
Not at all. Many borrowers prefer private money lenders to banks because they can originate loans faster, require less documentation, and are more savvy and open to alternative sources of collateral than banks.
Is it true I can use funds from my IRA to originate a loan? Yes. It is possible through a self-directed IRA. We can help you set up an account using Gap Investments IRA specialist.