Real estate developers know how important it is to secure capital quickly, or else face losing out on a great investment opportunity. Perhaps the end goal is to rehabilitate a residential property, such as a single family or multifamily home. No matter what your ambition is, one thing that’s for certain is the renovations costs are going to require a large sum of money a lot sooner than later. Therefore, having access to a fast and reliable source of funding becomes paramount for community rebuilders.
Most real estate crowdfunding platforms will host a project and wait for it to become fully funded before moving forward with the developer’s rehab work. However, there are some disadvantages associated with using this process. For starters, if the property takes a long time for the crowd to fund, it might end up being sold to another developer in the interim. In addition, real estate investors who have contributed funds to these potential projects are left waiting while their money is sitting dormant in a non-performing investment. And even if the project does get fully funded, the end result is still a lot of time lost that rebuilders could have spent rehabbing the property. These disadvantages are exactly why Patch of Land came up with the concept of prefunding real estate investments through its crowdfunding portal.
Prefunded real estate allows Patch of Land to give borrowers the funding they need up front to begin working on their fix and flip projects without delay. In many cases the process from application to close can take as little as 5-10 business days. Once Patch of Land’s underwriting team determines if a project meets certain underwriting criteria, the loan is then prefunded. This means real estate developers using Patch of Land do not have to wait around for the crowd to fund their loan. Instead the loan is prefunded before it’s offered to our crowd of accredited investors.
The reason we’re able to prefund our peer to peer rehab loans is because of the confidence we have in our due diligence process. The reliability and speed of the overall process lends itself to the efficiency of Patch of Land’s due diligence system. This system combines a highly sophisticated computerized scoring engine with a Makes Sense underwriting approach. While the computer generates scores based on hard facts, PoL’s Makes Sense underwriting helps take into account humanistic factors that computerized intelligence cannot quantify. As a result, PoL is able to accurately assess risk and calculate the profitability of every short-term investment opportunity with complete transparency and extreme confidence.
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Accredited investors also realize a huge benefit when participating in Patch of Land’s prefunded real estate investments. For example, because the peer to peer rehab loan is already prefunded, investors will begin to accrue interest on their contributions quickly -- 4 business days after an investment order is placed, and as soon as accreditation is verified. Once you are an active investor with funds on the platform, it can take as little as 24 hours. This is opposed to traditional real estate crowdfunding portals which will have your money resting until the loan is fully funded by the crowd. PoL’s method of prefunding is important for investors looking to diversify their portfolio with an active real estate investment, rather than passive investments.
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Patch of Land began offering prefunded real estate investment opportunities from day one because of the clear and apparent benefits it has for both borrowers and investors using its crowdfunding platform. Our successful prefunding methods are likely to set the standard by which other real estate debt crowdfunding platforms operate. We are proud to have set the trend and look to continue innovating new ways of offering the best products and services to our customers. Leave a comment and let us know what you think of prefunded real estate? Do you have any other ideas or concepts that might benefit all parties involved?
John C Grafft commented June 21, 2015
What are the parameters that one is "prefunding"?
Allan Rosenberg commented January 2, 2016
I am curious if there is a way as a potential investor to see how many loans have been repaid and how many are either in arrears, have defaulted, late or been foreclosed on.
From your website, it does not appear as if too many loans have been repaid. I attribute that to the fact that I believe you started loaning money only about 24 months ago