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Scotsman Guide Residential Edition | ScotsmanGuide.com | January 2018 40
Robert Greenberg is chief marketing officer at Patch
of Land. His experience includes more than 25 years
in marketing consumer and business-to-business
brands, with experience in retail, technology, finance
and real estate. Prior to Patch of Land, Greenberg
led the marketing efforts for B2R Finance, where he
helped originate more than $1 billion in real estate
investor loans that led to the industry’s first-ever
multi-borrower single-family rental securitization.
Reach him at firstname.lastname@example.org.
that time frame could be the death of a deal.
Most investors need to be nimble and able to act
quickly, especially in today’s highly competitive
In addition, with traditional lending, borrowers obtain financing based on the strength of
their personal incomes and financial records, not
on the value of the asset or the cash-flow potential of the property being purchased. As a result,
the best interest rates will only be available to
those clients with the finest credit and the ability to show consistent wages from W-2 earnings.
Many real estate investors are self-employed and
do not have a W-2 to submit to the bank making
It’s been interesting to see how the housing and
financial crisis has impacted the mortgage industry over the past decade. Although there has
been untold attention on all the new mortgage
regulations designed to protect consumers,
there also has been innovative disruption in the
The crisis — and the resulting tight credit markets that gripped the nation after ward — created
just the right impetus for a host of creative startups to fill the lending void and find new ways to
finance housing for real estate property investors. Originators who do not follow these trends
run the risk of being left behind as the real estate
debt-based portion of the crowdfunding industry helps fill the void with technology-based,
online options for borrowers and new outlets for
investors wanting to diversify their portfolios.
A joint study by the University of Cambridge
and the University of Chicago suggests that
the alternative lending sector, which includes
crowdfunding, “hit a stride” in 2016 and has
plenty of room for growth. Total market volume
in 2016 for alternative financing in the U.S., Canada, Latin America and the Caribbean was $35.2
billion, up 23 percent versus 2015. Real estate
crowdfunding accounted for just 2.3 percent of
the alternative lending market in 2015, but its
volume rose by 70 percent in 2016.
Real estate crowdfunding has a value proposition that appeals to many property investors. For
one thing, many online crowdfunding platforms
offer a national footprint that makes them very
accessible. Plus, like hard money lenders, debt-based crowdfunding can provide quick lending
decisions in days, not weeks.
Crowdfunding platforms don’t require the
borrower to raise funds from “the crowd.” Instead,
the crowdfunder takes a first-lien position on
the loan and offers it out to accredited investors
(the crowd) only after it’s been fully funded.
The sophisticated technology used by crowdfunding platforms to determine if it makes sense
to lend to a particular applicant also benefits the
“crowd” of investors. Some innovative tools even
allow investors to easily obtain greater access to
transactions that meet their specific predetermined investing criteria.
It should be noted that not all real estate debt-
based crowdfunders are alike. Originators who are
looking to build a lasting relationship with real
estate investors that goes beyond a single deal
should do their homework so they can advise
clients when asked about the pros and cons of
these platforms. The same goes for the hard
money and traditional mortgage lenders they
work with to finance their clients’ purchases.
Real estate investors have more options than
ever for financing their deals, but hard money,
traditional mortgages and alternative lending
products all have their pros and cons. Depending on each deal’s parameters, one product may
make more sense than others. Good mortgage
originators always look for the best options for
their borrowers because they know that making
clients happy is what brings them — and their
friends and family — back for the next deal. n