In this video, hard money lender Beau Eckstein explains how gap funding deals are made, what typical loan terms are, and offers good guidance on structuring these gap loans.
In short, you must be very careful when writing a gap funding deal because you're not always first in line in the list of creditors.
Hard money lenders want to see at least 10 percent of the real estate investor's own money in the deal, on both the acquisition and construction components of the project. Plus, most private money lenders will not lend more than 70 percent of the ARV (After-renovated Value).
Of course, there are many exceptions to these guidelines. Beau notes that borrowers can sometimes put up none of their own money and still get a gap loan. This usually occurs as a result of having done past successful real estate deals with the real estate investor.
For more information about gap funding using hard money lenders, see Beau Eckstein's site,