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The New Source of Capital ALL Rehabbers Should Know About

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Whether you are a buy-and-hold investor or a rehab, the hardest part of a project is often funding. Traditional bank lending has been the preferred method for long-term investors. Let’s face it. With historically low interest rates and 30-year interest rates, you could do much worse.

However, short-term financing can be difficult for investors who take a more aggressive approach to real estate investment. Many traditional lenders do not lend to real estate that requires extensive work. Usually, it makes no sense for rehab to go to the bank for a short-term loan, so they are often forced to look at alternative sources of funding. Rehabilitation is usually Private funding source Or a hard money loan when raising funds FlipSome of the more advanced rehab are affiliated with strategic partners who provide the necessary upfront funding.

How technology is changing real estate

But like many other aspects of the economy, technology is changing the game of lending. Crowdfunding was first started as a way for small businesses to raise startup funding through pre-sale of goods or promises of a VIP experience for very enthusiastic fans. Later, this method evolved into a company that offered a small amount of stock in return for investing in the company.

Related: Investor Analysis: Can Crowdfunding Confuse the Hard Money Lending Industry?

However, what started as a pre-sale method paved the way for the complete elimination of banks. As crowdfunding became more popular, peer-to-peer (P2P) lending was also launched. The two are similar, but not the same. The general public tends to use the two terms interchangeably, and until recently I learned that there is a clear difference between the two terms.

Crowdfunding is equity-based. That is, the investor owns part of the company. P2P loans, on the other hand, are debt-based and have interest rates and repayment periods. When the loan is repaid, the borrower clearly owns the property for free. If you are looking for alternatives to your personal investment portfolio, you may already be familiar with peer-to-peer lending platforms like Prosper and LendingClub.

Who is GROUNDFLOOR?

Ground floor Is a real estate P2P lending platform, the first and only platform to jump over a myriad of regulatory hoops to allow uncertified investors to participate in real estate-backed lending. For any rehab who may be reading this, or who is experienced, it means more capital from investors looking to add real estate exposure to their portfolio.

What do they do?

Here are some good stats:

  • Regular loans range from $ 50,000 to $ 500,000 (average $ 120,000)
  • Interest rate of 7-20% over a period of 6-12 months
  • Close in 21 days
  • No personal guarantee required
  • Fund up to 90% of project costs
  • Total cost of 4 points — 2.5% prepaid, 1.5% at closing

Why do I need to care?

As a rehab or developer, you’re probably already working with a private investor rather than a major bank. You had to raise and raise money for hard money lenders to fund your project. Imagine how much time and money you can save in the process if you no longer need to look for those investors and they are looking for you instead.

what Ground floor Very unique is the regulation A they revised (Read the press release here). Basically, this means that the uncertified public can still partially participate in these offers. This really opens up real estate investment to the crowd. That is, rehab has a much larger pool of capital to withdraw from it.

Another difference that distinguishes real estate P2P loans from other P2P lenders is that these real estate loans are secured by real estate. By comparison, loans on other, more common peer-to-peer lending sites are unsecured. As an investor, the fact that your investment is secured by real estate lien means that you have a legal claim against the real estate in the case of default.

Private money

Related: I used portfolio lending to transform my business. This is the way you can, too.

Where do they lend?

Ground floor We are actively lending in New Jersey, Maryland, Columbia, Virginia, North Carolina, Tennessee, South Carolina, Georgia, Alabama, and Florida.

As a buy-and-hold investor and entrepreneur, I am pleased to see the market changes that make it easier for real estate investors to borrow money. I don’t regret much about pursuing self-employment, except that the lack of stable income makes it difficult to finance potential investment properties.

Investor: What kind of money do you spend on rehabilitation transactions?

Let us know in the comments!

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