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Frequently Asked Questions and Facts
How long does it typically take Patch of Land to fully fund an investment offering?
Not very long. In many situations investments have been funded in just a few minutes and other loans may take several weeks to fully fund. As of May 2018, the average length of time it has taken to fully fund an investment offerings on the Patch of Land platform has been less than four days.
What is the maximum amount of time I may experience “cash drag” on a selected investment? (“Cash drag” meaning the length of time that Patch of Land will be holding investor funds without accruing interest.)
Any investment in an offering that has not been fully funded within 45 calendar days may be refunded upon request.
Can I elect to get out of an investment that has not fully funded?
Once you make a commitment to an investment offering, you are obligated per the Investor Agreement and will begin accruing interest once the offering is fully funded. In the unlikely scenario that the offering does not fully fund within 45 days, Patch of Land shall refund an amount equal to one hundred percent (100%) of the principal amount received upon request.
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What does it cost to list a loan on your platform?
Nothing! We work with real estate developers and hard money lenders who want to get more deals funded quickly. The borrower only pays for an appraisal, closing costs, origination points, and monthly interest. We don’t charge hidden fees, junk fees or transactions fees either.
What criteria is Patch of Land looking for when posting loans on their platform?
Our projects are evaluated on a case-by-case basis and in addition to the criteria below, Patch of Land’s Executives, and friends and family regularly invest personally in the projects. Accordingly, we fund and list only the most promising projects after performing full due diligence and in partnership with 3rd parties.
Our current guidelines for a debt purchase or refinance investments are:
- Minimum loan amount of $100,000
- LTV (Loan to Value) less than 80%
- Minimum down payment of 20%
- ARV (After Renovated Value) less than 65%
- Loan duration between 1-12 months with 6 month extensions available
- We will finance 100% of construction costs
- No Pre-Payment Penalties
We also ask for personal guarantees. Some of the guidelines listed above are negotiable, depending upon the strength of the project. If a property can be purchased significantly below its market value or if the Developer offers additional security components, we may consider a higher LTV or ARV.
Does Patch of Land accept projects in all states? Outside the United States?
Currently, Patch of Land accepts projects from every state except: Arizona, Nevada, Utah, South Dakota, Idaho, and Minnesota. However, we are actively pursuing ways to accept projects from these states. We do not accept projects from outside of the United States at this time.
For the most current listing please view our Lending Parameters
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What is the JOBS Act?
Enacted in April 2012, the Jumpstart Our Business Startups Act (JOBS Act) fundamentally changed the way that entrepreneurs access capital. The JOBS Act was designed to encourage the funding or small businesses and startups by easing certain securities regulations for both issuers and investors. A few of the main provisions include:
- Removal of the ban on general solicitation, allowing companies to publicly talk about raising capital
- Easing the restrictions on the “accredited investor” requirement, allowing non-accredited investors (anyone over the age of 18 regardless of income or net worth) to invest in certain private placements
- Allowing the creation of online funding portals registered with the SEC for the purpose of equity crowdfunding (yet to take effect)
- Increasing the limit on the amount a private company could raise and be exempt from registering with the SEC
Read more: JOBS Act Review
What is Reg A+?
Regulation A+ are the final rules promulgated by the SEC that were mandated by Title IV of the JOBS Act. The rules amended and expanded the existing exemptions under Regulation A by increasing the amount of capital smaller companies could raise through the offer and sale of securities. For more information about the requirements of Regulation A+, click here.
What does the current state of crowdfunding look like?
- The crowdfunding industry has grown 1000% in the past 5 years
- Crowdfunding contributes over $500 billion in funding per year
- Equity crowdfunding has already hit $662 million in the first quarter of 2015 and is expected to rise even further now that Title IV of the JOBS Act has finally been adopted
- Crowdfunding generates over $3.2 trillion in economic value per year
For up-to-date information check out CNBC Crowdfinance 50 Index
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Real Estate and Investing FAQs
Why should I invest in real estate?
What is the difference between debt and equity investments?
In a typical real estate transaction, a buyer will purchase the property with a combination of equity and debt. An equity investment entails an ownership stake in the property. While there may be more potential upside if the property appreciates and the cash flow is strong, the investment is also riskier. A debt investment refers to the loan used for purchase. This investment ensures fixed income from the interest on the loan and is secured by the property.
Read more: Difference Between Debt and Equity Investments
Is there risk in investing in real estate?
There is an inherent risk in any investment and real estate is no different. When investing in a property, there is a risk that the property may decrease in value. Real estate has its economic cycles that are difficult to predict.
Read more: Default Scenarios
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Why is Patch of Land now offering commercial real estate?
As our company continues to grow, Patch of Land is proud to be able to expand our product offerings into the commercial real estate lending space. This move will allow us to provide more diversification across different asset types for investors and offers a viable long-term option to your portfolio.
What makes Patch of Land an appealing lender for commercial loans?
Commercial real estate developers enjoy working with Patch of Land because of the following benefits we’re able to provide versus traditional and hard money lenders:
- Consistent and reliable funding – Gain access to a large pool of capital stemming from our network of accredited investors & institutional investor base.
- Speed to close – We know timing is everything. That’s why we’re able to close our commercial loans in 10-20 days on average, once all due diligence documents have been submitted and title is clear.
- Prefunded loans – Patch of Land funds your loan first so you don’t have to wait for the crowd.
- A nationwide reach - Our network of Investors spans across the United States.
- Ability to expand & grow your business - Take your business to the next level
Commercial Developers will typically utilize Patch of Land’s crowdfunding platform as a means of bridge financing. This allows Borrowers to acquire the properties quickly and bring them to a stabilized state in order to sell, refinance, or execute another exit strategy.
What are some of the different types of commercial opportunities Patch of Land will be looking to offer Investors?
The following are some of the commercial opportunities Patch of Land might offer:
- Multi-Family
- Office
- Industrial
- Hospitality
- Retail
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