How Gap Funding Helps Real Estate Investors Close More Deals | Andrew Carlton Interview
Show summary
In this episode of the Real Estate Pros Podcast, host Pedro Pereira interviews Andrew Carlton, a seasoned expert in real estate, construction, and land development. Andrew discusses his innovative approach to funding solutions for borrowers, emphasizing the importance of building strong relationships and a capable team. He shares insights on navigating challenges in the real estate market and outlines his vision for future growth, including customizable funding options. The conversation highlights the significance of collaboration and knowledge in achieving success in the industry.
Key takeaways
- Gold Leaf Investment Fund provides gap funding to fix-and-flip borrowers who are approved by a primary lender for 80% of the deal but can't cover the remaining 20% down payment.
- On a $350,000 deal where the borrower needs $70,000 (20%), Gold Leaf covers half ($35,000 plus half the closing costs) and the borrower covers the other half.
- Instead of charging interest, Gold Leaf takes 25% of the deal's profit as an equity partner; they started at 50% but lowered it to 25% so borrowers could keep more profit and return for repeat deals.
- Capital stack order at sale: primary lender gets paid first, then Gold Leaf gets its principal back, then the borrower gets their capital back, then remaining profit splits 75% borrower / 25% Gold Leaf.
- Borrowers can use the freed-up capital to do two deals instead of one, turning a 100% return on one deal into roughly 150% combined return across two deals.
- Gold Leaf blends investor risk by capping any single investor's exposure at 10-15% of their capital in one deal; returns across deals have ranged from about 28% to 60%.
- Andrew's team includes a member who has done over 3,000 fix and flips, lender relations staff, a CFO with 20+ years in land development/real estate, in-house legal counsel, and his son, a corresponding lender in Jacksonville, FL, who consults on underwriting.
- Example deal: a Charlotte, NC developer had land zoned for 400 homes, 80 pre-sales on a planned first phase of 100 homes, and a lined-up construction lender, but lacked cash to close — a project Gold Leaf would step in to fund.
- Andrew described solving a labor shortage in the Blue Ridge Mountains by funding his trusted plumbing subcontractors to buy more trucks and hire more people so he could control project timelines, with an option for them to buy him out later.
- He describes the fix-and-flip market as a $500 billion a year business and says Gold Leaf is positioning itself as a provider of liquidity/gap funding in that space, with discussions underway with family funds in Europe and the U.S.
About the guest
Andrew Carlton runs Gold Leaf Investment Fund, which provides gap funding/liquidity equity to fix-and-flip borrowers. He has over 50 years of experience in land development and construction, started his career digging ditches for plumbers, and has built custom homes and ground-up construction projects. His business evolved out of the hard money loan industry after he saw qualified borrowers being declined loans due to lack of closing funds.
Listen to the audio
“For any business to succeed, everybody has to win. The borrower wins in this deal because now he can do two deals and make 75% on each deal, instead of 100% on one deal.”
Andrew Carlton
“We started at 50%, but then it was just too much. We were getting kind of greedy. So we backed it down to 25% because we want the borrowers to actually make money, do well, and let's do more together.”
Andrew Carlton
“Knowledge is power. We can help. We're great partners.”
Andrew Carlton
“It comes down to intelligent contacts every time. Every time I talk to a dummy, I don't get anywhere.”
Andrew Carlton
Questions answered in this episode
What is gap funding in fix-and-flip deals?
Gap funding is capital that covers the shortfall between what a primary lender will finance (often 80% of a deal) and what the borrower can actually put up themselves. Gold Leaf Investment Fund covers half of that remaining gap, letting the borrower close deals they'd otherwise have to pass on.
How does Gold Leaf Investment Fund get paid instead of charging interest?
Rather than encumbering the property or charging interest, Gold Leaf takes an equity position and keeps 25% of the deal's profit after the primary lender and Gold Leaf's principal are repaid and the borrower gets their capital back.
How much money does a borrower need to come up with on a typical deal with Gold Leaf?
On an example $350,000 deal requiring 20% down ($70,000), the borrower only needs to come up with $35,000 plus half the closing costs; Gold Leaf covers the other $35,000 plus the remaining half of closing costs.
How does Gold Leaf manage investor risk across deals?
Andrew Carlton says they blend returns and will not put more than 10-15% of any one investor's money into a single deal, spreading risk across multiple projects where returns have ranged from about 28% to 60%.
What happens if a deal runs into trouble?
Andrew says Gold Leaf keeps a reserve and asks borrowers to communicate problems early rather than being surprised. If needed, the fund will step in and help finish the house so the borrower stays in the deal and gets their money back.
How can investors or borrowers reach Andrew Carlton?
Andrew is reachable on LinkedIn under Andrew Carlton at Gold Leaf Investment Fund, by email at andy@goldleafinvestmentfund.com, and says he'll share his mobile number directly with anyone who reaches out by email.
Resources and links
- Andrew Carlton’s Website
- Andrew Carlton on LinkedIn
- Andrew Carlton Email: andy@goldleafinvestmentfund.com
Full transcript
Andrew (00:00)
any business to succeed, everybody has to win. The borrower wins in this deal because now he can do two deals and make 75 % on each deal,
instead of 100 % on one deal.
lender can lend more money, and they win. And we win because we’re equity partners in the deal, so our investors make a lot of money.
Pedro Pereira (01:56)
Hi everyone, welcome to the Real Estate Pros Podcast. My name is Pedro Pereira and today I’m joined by someone who we’ve been looking very forward to chat with, Andrew Carlton, who’s been making some serious moves in the real estate space, specifically having to do with construction, land development experience, and also lenders. So let us talk to Andrew. How are you doing today?
Andrew (02:18)
Oh great Pedro, thank you for having me on. I appreciate it very much.
Pedro Pereira (02:23)
Perfect, my friend, we’re happy to have you as well. So let’s dive in, all right?
I think our listeners are really going to take something away about how you’re approaching with your unique algorithm to reach lenders and borrowers from all sorts of areas and specifically using the research that you have to know which ones to reach ⁓ more precisely. So first off for the listeners here that may not be completely familiar with your business, give us the short version, the perfect little elevator pitch as you may about your business, your focus these days and the markets that you’re operating in.
Andrew (02:58)
Thank you. ⁓ Our business evolved from the hard money loan business into liquidity equity with fix and flip borrowers. We ran into problems with conversions, ⁓ why borrowers were being declined for loans in the fix and flip industry. And we’ve come up with an algorithm that took us about two and a half years and I’ve been in the land development.
land development business, construction business for over 50 years. And I wanted to solve that problem because we had a lot of qualified borrowers that just didn’t have the money to close on loans. So what we do is we get with the borrowers, the banks send us
Good customers, good borrowers, they’ve already been vetted, the property’s been vetted, the appraisals have been in, the borrowers love the areas that they’re in and say, hey, I’ve got a borrower, we will loan them 80 % of what they need. They need to come up, and I’m picking an average type deal, the borrower needs to come up with 20%.
Pedro Pereira (04:05)
Mm-hmm.
Andrew (04:08)
He just doesn’t have the money. So on a typical deal that’s, let’s say, $350,000, they need to come up with $70,000. We’ve created the situation where if they don’t have the $70,000 to come up, we’ll come up with half of that. We’ll come up with $35,000 plus half the closing cost. The borrower will come up with $35,000 plus half the closing cost.
Pedro Pereira (04:19)
Mm-hmm.
Mm-hmm.
Andrew (04:36)
And
now that deal can close. Now the primary lender will loan him that other 80 % to do the purchase and the renovation so he can put the house up to sale and make a profit. For that, we do not encumber the property. We do not basically encumber the borrower with interest. What we do is we take 25 % of the profits.
Pedro Pereira (04:45)
Love it.
Mm-hmm.
Andrew (05:47)
So we’re providing liquidity for equity. It’s basically gap funding.
Pedro Pereira (05:47)
Perfect.
Okay.
Andrew (05:53)
The borrowers love that. We started at 50%, but then it was just too much. We were getting kind of greedy. So we backed it down to 25 % because we want the borrowers to actually make money, do well, and let’s do more together. So that’s what we do. So when the house sells, the capital stack is the primary lender gets paid.
Pedro Pereira (06:00)
It’s a little… Of course.
Of course.
Andrew (06:19)
our company which is Gold Leaf Investment Fund, we get paid, then the borrower gets paid, the money that we’ve put in, and then we split the profits 75-25. That’s basically what our program’s about.
Pedro Pereira (06:32)
That’s incredible. It’s definitely a very unique program, a unique opportunity.
And what really caught my attention is how you mentioned not only the fact that you took some time developing this algorithm, that you really focused on the borrows and you’re here to help people be able to gain these opportunities to purchase homes, to purchase into these fix and flips, which is something that we need to be able to make more available to people. So especially in this climate, this very volatile ⁓ market change with all the interest rates going up and down, ⁓ it’s not easy to manage all this all the time. How have you been able to
keep this machine running so smoothly.
Andrew (07:10)
Well, I’ve got great people. And you said something that I really like because
business to succeed, everybody has to win. The borrower wins in this deal because now he can do two deals and make 75 % on each deal, which is 150 % on two deals.
instead of 100 % on one deal. So it gives him a better rate of return, return on his investment, and he wins, and the lender can lend more money, and they win. And we win because we’re equity partners in the deal, so our investors make a lot of money.
Pedro Pereira (07:56)
Mm.
Andrew (07:57)
But I put a good team together. To answer your question before, I put a great team together. We’ve got people, I’ve got a member of our team that’s done over 3,000 fix and flips. We’ve got lender relations people that has been in the primary lending business for years. We have a CFO that’s 20 plus years in the land development and real estate arena. I got a great in-house counsel, legal counsel.
Pedro Pereira (08:13)
Mm-hmm.
That’s incredible.
Having those sort of relationships and that team is absolute key to be able to make sure that a business thrives, succeeds and pushes forward.
Andrew (08:26)
⁓ my-
yeah,
will. You know, I at my stage in life I do not wanna I don’t. I do not want to train. not. don’t have the patience to train. I don’t want to try.
Pedro Pereira (08:40)
Yeah, of course. Do you see
a direct correlation in the experience that you have with the team when you enter deals and you go into talking to new borrowers and lenders? Do they feel that experience?
Andrew (08:53)
yes, they know right away because of the questions we ask them. And if I have a problem, we know who to go to for the appraisal. Sometimes appraisals don’t come in right. ⁓ You know, we have to know all aspects of the team. ⁓ My son is a very successful, and I’m not bragging on him, maybe I am.
My son is a very successful corresponding lender in Jacksonville, Florida, and he deals on the retail side. So he’s been doing underwriting and I consult with Ed all the time and just a great part of the team to make sure that the questions that we ask, I have all the backup we need, because I do not want to risk our investors’ money, because we do blended returns. We will not put a certain percentage more than
Pedro Pereira (09:36)
Fantastic. No, that’s great. If anything…
Andrew (09:44)
let’s say 10 or 15 % of an investor’s money in any one deal. So that this way it’s blended. And some deals make 60 % rate of return. Some deals make 28 % rate of return. But the likelihood is such a safe industry, the likelihood of
Pedro Pereira (09:48)
Mm-hmm.
Andrew (10:35)
20 deals failing is almost nil. Not the way we underwrite.
Pedro Pereira (10:39)
That’s great.
Thank you for that, for expanding on that. I did not feel like you were bragging about your son at all. It’s great to talk about family, in fact to work with them, having a trusted team. It brings a lot of joy to me seeing a father and son duo really helping people out there. Perfect.
Andrew (10:46)
Yeah.
Yeah, we used to eat a great young man. Yeah, thank you.
Pedro Pereira (10:57)
Now, as we can hear, know, ⁓ great things are happening, we see it, but every operator does, you know, have sometimes when moments get real, when challenges really come up and that you might have to pivot fast or maybe a deal that went sideways. Do you wanna share one of those moments with us so we, you know, get a bit of the reality?
Andrew (11:12)
⁓ great.
Thanks Pedro, because that’s what we really pride ourselves on. We’re in it with the borrower. So if there’s a problem, tell us. Don’t surprise us. know, everybody hates it in business, you know. You can deal with problems. It surprises them, the rough ones. And just tell us, because we keep a reserve in our account. So if we have to step in and help a borrower, or we have to take it over and finish the house.
We make sure that the borrower at least stays in the deal and doesn’t get hurt. We want to see him get his money back also. So we’re in it together. I would not go into a business where I would be cutthroat or I grind on people. I want to see people successful because I want to borrow to say, hey, this was a great experience, Andy. I’ve got one or two more that I’d like to do. that’s my business. Repeat sales, right? Yeah.
Pedro Pereira (12:07)
repeat sales of course, yeah,
diving into those opportunities, creating those bonds with clients, that’s great. And I can see that it’s definitely a big challenge to go into it with the borrower as well, you you’re going into a deal, you got to make sure you have your thing, your information vetted, your research done. And as you said, not all deals, you know, lead back to a huge rate of return, although you have a very positive one. So I understand that those challenges can come up and it’s very good to have both players with the skin in the game. Then you know that it’s really a, really a true partnership.
Andrew (12:12)
Yeah!
Yeah. And
you want your partner to be as knowledgeable in the construction and the renovation end as possibly can be because maybe we can shop materials a little bit differently. Maybe we have a team of contractors in that area that can come in and help you. ⁓ All kinds of opportunities to deal with knowledge is power. We can help. We’re great partners.
Pedro Pereira (13:00)
of ⁓
Andrew (13:01)
Yeah.
Yeah.
Pedro Pereira (13:29)
you your team and you’ve just been developing and coming up with a better and new ideas to help people get these loans and help people be able to buy into the fix and flip.
Andrew (13:38)
Here’s a perfect example too, Pedro, if I may say. We had a developer from Charlotte, just outside of Charlotte, North Carolina. And he just got this whole large piece of property zone for 400 homes. And he wanted to start the first phase with 100 homes. And he had 80 pre-sales.
and he had the construction lined up, but he didn’t have the cash to close with the construction lender. So he came to us. So that’s the kind of project, but he had half of it. That’s the kind of project that we would go in with him on. We could help him on it. We could help him market. have a great operation. We have a great network of realtors that we work with, a great, for lenders.
Pedro Pereira (14:10)
Uh-huh.
Mm-hmm
Andrew (14:25)
You know, we can help them in many different ways. And that’s the kind of project that he was so excited about that because he spent a couple of years getting all the approvals and then he was shot down by the primary lender and we would come in and do that with him.
Pedro Pereira (14:41)
Wow, well the Superman saving the day, right? ⁓ Coming in. ⁓ Making sure that the Baro gets what they want. know, dreams do come true. ⁓
Andrew (14:44)
I think I’ve been called a lot of Hey Pedro, I’ve
been called a lot of things but never that I’ve never called Superman. That’s for sure
Pedro Pereira (14:53)
Ha
that’s very big, hearing that, seeing how you have such a great team
in place and seeing the positive impact that you’re already having on this market, I want to know if you’re already thinking about the next big goal, what is the next step for you guys to be able to either upscale, to gain more people, I want to know the company’s vision, your guys’ vision.
Andrew (16:02)
That’s great. I’m so glad you asked me that. ⁓ Because everybody tells me, don’t get ahead of yourself Andy. I’ve already got some of that planned out. I want to do a customizable fund. And in that customizable fund, I have so much experience in ground up construction, in land development, anything relating to the construction industry. ⁓ Because I started off digging ditches for plumbers. And I grew up in the industry.
So I want to do a customizable fund with a gentleman like we met in Charlotte. If a lady comes up and she has a couple of homes she wants to buy, she wants to get on her feet, we could do the fix and flips with her if she so chooses. We can do ground up for homeowners. I’ve done a lot of custom homes in my life, in my career. And we can do ground up construction. We could take over existing
Pedro Pereira (16:40)
Mm-hmm.
Mm-hmm.
Andrew (17:00)
properties, finish up land development. We can go into ⁓ multi-family. I don’t care if it’s 30 stories high. ⁓
Pedro Pereira (17:06)
Mm-hmm
Andrew (17:10)
You know, ⁓ we were building in the Blue Ridge Mountains and that had its problems. In other words, you couldn’t get plumbers, you couldn’t get electricians. So what I basically did was the plumbers that I used and I was comfortable with, I put up the money for them to expand their operation, more trucks, more people. So we owned basically all our subs so we could control our projects. We can get them done on time and expand their businesses. And I always gave them opportunities to buy me out and do what they want.
Pedro Pereira (17:33)
Mm-hmm.
Got it.
Andrew (17:39)
you
know, and move on. So, you know, you do what you have to do. And the fix and flip marketplace, it’s a monster. It’s a $500 billion a year business. And we’re the only ones providing the liquidity or gap funding in this whole business. So.
You know, we’re talking to some major, major family funds over in Europe right now, and some right here in the United States, and we’re talking large numbers. I don’t know if I want to build a company that big and place all of that. mean, wow, I mean, so the industry’s there. ⁓ We’re always looking for good partners. We’re always, and I didn’t get on this podcast for that. got on just to…
Pedro Pereira (18:13)
Yeah, that is big.
Andrew (18:26)
just to talk with you and your audience. we’re always available to work with everybody. There’s always an opportunity to invest, to work with us.
Pedro Pereira (18:39)
well that’s great to hear. No, that’s why we have this as well. It’s great to have listeners be able to connect with you, hear your story, and maybe even really reverberate to some of the things that you’re saying and want to reach out. Part of this is to be able to get your message out there as well, so you’re definitely in the right place to do it. ⁓
Andrew (18:54)
And
you know, Pedro, anybody can call me on my cell phone. I’m not one of these guys to say, well, that’s going to cost you. If I can help somebody, for gosh sakes, just call me. I know so many people. If I can help you, please. You know, just give me a call. I’d love to talk with you.
Pedro Pereira (19:13)
wow that that’s big
honestly I can guarantee that some of the people listening that are either here very early in their journey or just looking to level up will benefit a lot from hearing this and will definitely reach out to you as well to be able to get some some advice so
Andrew (19:26)
Well, you know, after you’ve been around long
enough, you’ve made enough mistakes. mean, you know, where does wisdom come from? I’m not a textbook guy. I never learned much from a textbook. I should have gone to trade school instead of going to college. I would have learned more in trade school. But you get it by being out there doing it, you know?
Pedro Pereira (19:38)
Uh-huh.
Exactly, exactly. And to build into that, you know, with the experience that you bring and the way that you speak to the borrows and stuff, obviously the team that you’ve built, you see that building relationships in this industry and growing your network is one of the biggest, ⁓ you know, either it could be an obstacle or one of the greatest opportunities that people have in here. What has made the biggest difference for you in that outreach with being able to connect with people and build those relationships?
Andrew (20:08)
Great
question. And I tell everybody this. It comes down to intelligent contacts. You’ve got to be able to go out and people have to like you and have confidence in what you do. And you’ve got to, it comes down to intelligent contacts every time.
Pedro Pereira (20:12)
Yeah
Mm-hmm.
Andrew (20:27)
Every time I talk to a dummy, I don’t get anywhere. Every time I talk to somebody, know, the dummies think they know what they’re talking about. But every time I talk to somebody that does know, I learn from them. And that’s the key, because that’s what I respect during my working hours. Now, that doesn’t include my friends. My friends are, we’re all over the place, you know what I’m saying?
Pedro Pereira (20:50)
Yes, that’s how it should be too, know, definitely during the work time. You can’t fake that sort of relationship and you can’t fake that
sort of learning. Relationships are everything in this space, whether it comes from someone who will just, you know, see it through with you or the person that you’re learning the next steps from. So that’s great to hear.
Andrew (21:07)
Yeah.
Pedro Pereira (21:08)
⁓ Before we wrap up,
if someone did want to reach out, we did mention that, to connect with you, maybe collaborate, partner, what would be the best way for them to reach you? Do you have Instagram, LinkedIn, phone numbers?
Andrew (21:21)
I’m on
LinkedIn under Andrew Carlton. That’s C-A-R-L-T-O-N at Goldleaf investment fund. Now there’s a couple of gold leafs on there, but we’re the gold leaf investment fund. ⁓ That’s what we do on the web, but my email address is andy at goldleafinvestmentfund.com.
Pedro Pereira (21:32)
investment fund
Mm-hmm. Act coldly perfect.
Andrew (21:44)
and my phone number,
just email me and I’ll be more than glad to give you my mobile number. I answer my phone.
Pedro Pereira (21:51)
Perfect yes, no that that’s fantastic to be able to stay so open and connected ⁓ perfect well
Listen, Andrew, we appreciate your time immensely, your story and especially your perspective on this ⁓ industry. We definitely need more people in this space that are doing it the right way. And I can guarantee that you guys are heading in the right direction. The sky is the limit. ⁓ For those of you tuning in, if you got some value in this, please make sure that you are subscribed. We will have more conversations coming up with operators just like Andrew, who are building real businesses. And we will see you on the next episode. Thank you so much today, Andrew.
