Laura Catalino
SVP of Investor Relations,
Money360
949-579-2200
In evaluating and choosing an online lending platform, investors should consider all business conducted by the platform, alignment of interest (between the platform and investor) and the way in which the investor’s interest is secured.
Platforms can be marketing portals, origination platforms or hybrids. If the platform is aggregating deals from others, what is the platform’s involvement in underwriting? Who is actually underwriting the loan? Other platforms source, underwrite and service the loans all in-house.
If the platform raises equity in addition to debt, for the same transaction, which investor base is the platform aligned with—the equity side or the debt side? In a foreclosure situation, which side will the platform represent?
Finally, how are you as the lender secured? Some platforms issue borrower-dependent notes that offer an indirect security interest, meaning the investor is exposed not only to deal risk, but also to platform risk. With this structure, if the platform were involved in litigation or filed for bankruptcy, investors would be exposed to the credit risk of the platform in addition to the risk of the commercial real estate loan. However, some platforms use LLCs or put investors directly on title. These structures provide a direct security interest and are “bankruptcy-remote” from the platform.
With all of the above, nothing is inherently “wrong” or “dangerous”—but investors should have a complete understanding of the business of the platform and how they are secured.
Matt Rodak
Chief Executive Officer,
Fund That Flip
646-895-6090
There are certainly many criteria to look at when choosing a lender to help you scale your business. In my opinion, one of the main things to consider is the expertise and experience the lender has for your specific kind of project.
Flipping a house has many moving parts. Everything from finding a deal, getting it on contract, closing quickly, managing construction draws and selling the house requires a lot of coordination. Any process that has so many moving parts inevitably is going to also have things that don’t go 100 percent according to plan.
Partnering with an experienced lender that is familiar with your type of project offers you several benefits. First, the lender is going to understand that things don’t always go according to plan and is going to be equipped to work with you to manage the new reality. Second, the lender’s experience can be a great help to you while you think about your best path forward as your project evolves.
Just like you want to work with plumbers or electricians who are experienced and specialists for their trade, you want to also pick a lender that specializes in your type of project.
Adapia D’Ericco
Chief Marketing Officer,
Patch of Land
888-959-1465
When selecting a marketplace lending platform, real estate investors should do their due diligence to ensure they are working only with highly reputable, well-funded and transparent platforms that are building their business ethically and with the use of technology. It is easy to create a website and add words like “crowdfunding” or “marketplace lending,” but the truth is that the operations of the underlying company—and its leadership—are two defining factors that will help investors understand whether they want to build a relationship with that company.
That being said, it is always advisable to do some research on that company online. Is the company considered a leader? How long has it been in existence? Who makes up the management team? How much information is provided on the site? Are there testimonials and reviews? Is the company active online, on LinkedIn, on the forums? These are all some questions that one should ask and research.
Additionally, because real estate is a relationship-intensive industry, I encourage investors to pick up the phone and call the company and speak to its representatives! You don’t want to be shepherded solely through a website or form. Eventually, you’ll wonder why real estate lending wasn’t always done that easily, but to begin with, strike up a relationship. With competitive rates and no hidden or junk fees, crowdfunding is a viable option for real estate entrepreneurs looking to scale and grow their businesses.
Nav Athwal
Founder and Chief Executive Officer,
RealtyShares
855-880-6050
There are many admirable online platforms already making their mark in the real estate investment community, with additional platforms on the horizon as regulations continue to evolve. Even in an industry that is still finding its footing, there are many options available to real estate investors.
RealtyShares finds that its investors place high value on asset type, investment type and geography. Real estate investors demand a wide selection, with the supporting information required to make informed decisions. A diverse deal flow that ranges across debt and equity investments and residential and commercial properties with a national footprint will offer investors more options and greater potential for diversification—something we at RealtyShares believe is key.
Track record is also very important. On average, investors on the RealtyShares platform reinvest eight times a year, often across a diverse set of borrowers and sponsors.
Our investors like to learn as much about each borrower or sponsor as possible. As such, investors have responded to platforms with a high level of transparency, a diverse set of opportunities and a team that is equipped with the knowledge and experience to underwrite opportunities and sponsors appropriately.
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