The Gator Method in real estate is a strategy where investors partner with other wholesalers and lend them earnest money (EMD) money for wholesale deals. It involves finding trustworthy partners who have great deals that will repeatedly borrow from you at a high interest rate.
The strategy was first introduced by Pace Morby, and is appealing to new real estate investors because it allows them to jump into the market quickly without the larger financial commitments and risks involved with wholesaling and flipping. Investors can make quick profits, in as little as 30 days…
Just like a congregation of alligators — patient, opportunistic, and quick to strike when the time is right — real estate investors who are successful with the Gator Method know how to find wholesalers, carefully watch for the right deals and act swiftly to capitalize on them.
Understanding the nuances of the Gator Method, from finding deals to financing, is crucial for investors looking to leverage this strategy for fast, low-risk profits. In this article, we’ll break down how the Gator Method works, explore some real-life examples, and help determine if it’s the right approach for your real estate business.
How Does the Gator Method Exactly Work?
As mentioned, the Gator Method in real estate focuses lending small amounts of money to wholesalers, typically to fund their earnest money deposit (EMD). Successful wholesalers put several properties under contract every week, and oftentimes may have funds tied up into other deals. In order to secure their next great deal, they may need a short term loan to fund EMD on their next contract.
Often referred to as Gator Lending, this type of lending ranges from $500-$10,000, 1- to 30-day term and comes with a higher-than-average interest rate plus origination fees. These lenders focus on speed and can typically approve deals immediately, especially if they have a good relationship with the wholesaler. Repayment is expected immediately at the closing of the deal.
Since most wholesalers are working with motivated sellers, deals typically close fast and don’t require the investor to hold or renovate the property, like you would when flipping a house.
Because of the quick turnaround, high fees and interest rates, Gator Lending can provide nice returns which can be reinvested quickly into other deals making it a powerful real estate investing tool.
What is the Gator Method in Flipping Houses?
The Gator Method is completely different from traditional house flipping. You’re not spending months fixing up a home. With the Gator Method, you’re finding deals, funding the EMD and then getting your money back within a few weeks — or even days.
Using the Gator Method in real estate…
- No renovations are needed. Unlike typical house flips, the Gator Method doesn’t involve costly and time-consuming renovations.
- There is minimal hold time. Properties aren’t held long-term like they often are with flips, reducing the risk associated with market changes and holding costs.
- Quick profits. While speed is the same goal for Gator Method deals and traditional house flipping deals, investors using the Gator Method are investing less money and can do more volume because of the quick turnaround.
If you’re looking to flip houses without the usual capital, time investment, or risks associated with traditional flipping, the Gator Method may be a good option for you.
How to Find Gator Method Deals
Finding the right wholesalers to partner with is crucial for success in using the Gator Method. Before getting started, you will want to network with other wholesalers who are doing a high volume of deals. Working with experienced wholesalers who have a track record of closing deals is less risky than partnering with new wholesalers who may not be able to source a buyer and close the deal.
Additionally, you can also search for your own wholesale deals and bring them to your wholesale partner for even larger profits. If you bring a deal to a wholesaler, you could JV that deal, earn 50% of the assignment fee and earn money on lending the EMD. You could double dip and earn even larger profits!
Here are some effective ways to find those deals:
- Find Motivated Sellers: Target sellers who need to offload their properties due to some form of financial distress. This could be recent divorcees, those who need to relocate, or some other urgent reason. Direct mail campaigns can often uncover these people.
- Set Up Alerts On Real Estate Platforms: Zillow, Redfin, or Realtor.com are the best sites to identify properties that have sat on the market for a while. You might also find deals on Craigslist or Facebook Marketplace.
- Attend Real Estate Auctions. Auctions are a great place to find below-market properties. However, make sure to do your due diligence on the property ahead of the auction.
- Find a Realtor Who Specializes in Distressed Properties. You need to work with agents who handle lots of foreclosures, short sales, and distressed properties. They can identify properties for you and help speed up the closing.
- Drive for Dollars. This is old school, but drive around neighborhoods and look for signs of distressed properties — overgrown lawns, neglected maintenance, or “for sale by owner” signs. Then, attempt to reach out to the owner of those properties and see if they’re interested in selling.
The Risks of Gator Lending
With any real estate investment strategy, there are risks to consider. With Gator lending, you are essentially giving an unsecured loan to someone who may not be in a good financial position to begin with. If the wholesaler defaults on the purchase agreement with the seller, and loses the EMD, you risk not being able to recover that money.
There are ways you can protect yourself, however. Before lending money, ask the wholesaler for a copy of the contract so you can review the terms and conditions. Most wholesalers will have a due diligence period where the EMD is fully refundable up until a specific date.
During this due diligence period, wholesalers will be looking for end buyers to assign their deal. Once an end buyer has signed the assignment contract, they will put down EMD, usually equal to or greater than the EMD the wholesaler put down. In other words, if the new buyer (assignee) defaults, they would forfeit their EMD to the wholesaler (assignor) protecting the wholesalers EMD investment (and the Gator Lenders).
If the wholesaler is unable to find an end buyer during the due diligence period, you will want to make sure they submit the proper cancellation documents to the seller and request a refund of EMD. Keep in mind, the EMD is held with an escrow agent or title company and not the wholesaler. This offers some protection because the escrow agent acts as an intermediary between the buyer and seller. If the wholesaler cannot find a buyer for their deal, the escrow agent will refund the EMD as long as the request is timely and falls within the guidelines of the contract.
As mentioned earlier, partnering with the right wholesalers can reduce this risk associated with Gator Lending.
Another potential hurdle of the Gator Method is finding wholesalers and deals in the first place. Most wholesalers don’t need to borrow EMD, and many wholesale contracts don’t use EMD at all. If the market becomes too saturated with Gator Lenders, there might not be enough wholesale deals out there to lend on.
Reviewing the Pace Morby Gator Method Course
Pace Morby is widely recognized as the father of the Gator Method. Known for his expertise in Sub-To investing, he is a prominent figure in real estate investing and even has his own TV show. As such, he offers courses and content teaching people how to take advantage of his unique methods of real estate investing, including the Gator Method.
Morby’s approach, combined with his extensive teaching and hands-on support through his “Gator Tribe,” has made the Gator Method a popular strategy among real estate investors seeking to minimize risks and maximize profits through quick, strategic transactions.
As expected, the course has received mixed feedback.
Many users praise the course for its thorough content and supportive community. The curriculum covers all aspects of the Gator Method, including detailed videos and additional side content to reinforce the main lessons. Participants often highlight the community aspect, where fellow investors share insights, provide guidance, and help each other navigate the complexities of real estate investing.
On the other hand, some participants feel the $3,000 price tag is too steep, arguing that while the education is valuable, actual results (closed deals) depend heavily on individual effort and market engagement.
The biggest obstacle, according to those who have gone through the course, is finding wholesalers to work with and securing deals.
Is The Gator Method Legit?
Yes, there is money to be made using the Gator Method. It is very much so legitimate.
While it may sound unconventional compared to traditional investing, the Gator Method’s strategic use of short-term funding, quick transactions, and minimal holding times make it a legitimate and effective approach for those who understand how to navigate it. However, it’s crucial to be aware of the potential challenges, such as finding wholesalers and deals, and risks associated with giving an unsecured loan to someone who may not be able to pay you back.
If you’re new to real estate investing and want to talk about what RE investing method might work for you, reach out to start a conversation.
Gator Method FAQs
Can anyone use the Gator Method?
Yes, anyone can use the Gator Method, but it may not be the best strategy for all real estate investors. It’s best suited for someone who understands wholesaling and who is willing to put in the time networking to find the best wholesale partners.
How much money do I need to start the Gator Method?
You don’t need a large amount of money to start the Gator Method. Often, the primary cost is providing earnest money deposits (EMDs) for deals, which can range from a few hundred to a few thousand dollars, depending on the property and the seller. Many investors use short-term funding or partner with others to cover these costs, making it accessible even if you have limited personal capital.
What are the biggest challenges with the Gator Method?
The biggest challenge is finding suitable wholesale partners and deals. Opportunities are tough — especially if you’re not already active in the wholesaling space. Many wholesalers use contracts that don’t require EMD, making it even harder to find potential Gator Method deals.
How do I find Gator Lenders if I need to borrow EMD?
To find Gator Lenders, you need to network with real estate investment groups — locally and online. There are public and private Facebook Groups related to Gator Lending. Connecting with other investors and wholesalers there can lead to valuable introductions.
Bottom Line
Is the Gator Method a scam? No, the Gator Method is not a scam. It’s a legit investment strategy and there is money to be made. Just like any other real estate investing strategy: wholesaling, flipping houses, buying rental properties…. there are pros and cons, and risks associated with each strategy.
The Gator Method is a good strategy if you are looking to lend small amounts of money passively for a quick ROI. But you’ll need to put in the work initially in finding the right wholesalers to lend your money to.
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