Advantages of Pre-Funding and Why Patch of Land Does It

We have a unique way of doing things here at Patch of Land. Not only our focus on crowdfunding real estate debt investments, but also our pre-funding of deals, which has multiple benefits for developers and investors.

Due to the rapidly rising real estate prices in different markets, there’s a great deal of opportunity in distressed properties that can be quickly rehabbed and resold. As a rule, the larger the discount on a distressed property, the less time a potential developer has to acquire the property. A traditional crowdfunding platform can take 30 to 60 days to raise funds for the project, not including the time required for due diligence, negotiation, contract formation and closing. The time required to fund a property through the crowd can be prohibitively long to acquire high opportunity properties. Pre-funding allows us to secure the deal immediately after due diligence is performed and a contract is negotiated. This is enormously helpful to our developer partners because Patch of Land is able to take advantage of higher opportunity projects by guaranteeing funding and our investors are able to earn returns nearly immediately after pledging funds.

Traditional crowdfunding platforms require their projects to fully reach their funding goals prior to the project moving forward. Since this process can take weeks or months, it means an investor can have their funds tied up for an extended time before they start earning interest or equity. It’s possible that the deal won’t close at all and there’s a wasted opportunity cost to consider. Since Patch of Land pre-funds and launches the project immediately, our investors are able to start earning interest nearly immediately. Once an investors funds clear escrow, usually within 2 to 3 business days, they start earning interest immediately.

With pre-funding, Patch of Land is consistently reliable for our investors and developers. If a project were to not reach its funding goal and therefore fail, it could have negative consequences for our developers who may lose the property to another investor, and also lose their earnest money. Pre-Funding allows us to guarantee their project moves forward and that can be of paramount importance in a quickly moving market. On the other side, if a project fails, our investors funds could have been used much more productively elsewhere. Pre-Funding allows our investors the assurance that their money is actively working for them, not sitting idle in a failed opportunity.

Jason Fritton
Co-Founder & COO