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Frequently Asked Questions

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.

When Patch of Land reports the Internal Rate of Return (IRR) on an investment, does the calculation take into account the period of time that investors do not accrue interest prior to the loan offering becoming fully funded?

No, our IRR calculation is based on the return we are delivering to investors once the investment becomes “active.” However, since most offerings get fully funded quickly the “lag” time to for most offerings will be marginal.

Are construction draws treated the same as initial loan launches?

Yes, the same interest accrual rules apply to construction draws.

How do you calculate interest?

Patch of Land calculates interest using a day-count convention method (30/360). Day-count convention determines how interest accrues over time for a variety of investments including: bonds, notes, loans, mortgages, medium-term notes, swaps, and forward rate agreements (FRAs). This system is important in calculating accrued interest and present value. There are several different types of day-count convention methods. For example, a 30/360 day-count convention assumes there are 30 days in a month and 360 days in a year.

Read more: Understanding the 'Day-Count Convention' of Calculating Interest

Is my investment secured?

Investments are directly secured by the first lien position on the property corresponding to the underlying borrower loan:

  • Secured Investment: All of our offerings are secured as to a pledge of collateral only as to the underlying borrower note, mortgage and related cash flows to the indenture trustee. To be clear, the collateral is not pledged directly to an investor as a holder of the borrower payment dependent note, but is instead pledged to an indenture trustee under which the investor benefit as note holders.
  • Perfection of Security Interest: In order to perfect our investors' security interest and ensure the priority of that perfected security interest, the secured party must take possession of the promissory note. Therefore, a trustee will take and maintain possession of the borrower note.
  • Public Notice: And lastly, to perfect the security interest and put third parties on notice, a UCC-1 is filed that puts any potential third party creditors on notice that the underlying borrower loans have been pledged to the trustee for the benefit of investors.

What is the difference between initial maturity date and final maturity date?

The initial maturity date refers to the date the loan is due in full by the borrower. That is, if a loan is originated on January 1, 2015 and has a term of 12 months, its initial maturity date will be December 31, 2015. This date corresponds with the date investors can expect to receive the balloon payment of the remaining principal and interest. In contrast, the final maturity date is the last date in which the lender is able to take foreclosure or collection actions in response to default. For example, if a borrower defaults on the loan and the final maturity date is set for June 20, 2018, Patch of Land would have until that date to initiate foreclosure or collection proceedings.

I'm not an accredited investor but want to invest. How can I do so?

Patch of Land is committed to building wealth and democratizing investment opportunity. At this time, U.S. securities do not allow us to accept investments from those who are not accredited investors. However, we continue to advocate and research ways to allow opportunities from investors who are not accredited.

My contact info has changed. Where can I change that?

  1. Log into with your Username and Password
  2. Click on the "Account Settings" Tab
  3. Under 'Update My Information', click on the green link that says "Manage your address book"

What information about the guarantor will Patch of Land disclose? What information do you not disclose?

Patch of Land takes privacy seriously. As such, Patch of Land will only disclose information that is already publically available. Whatever information provided in the due diligence package is the only information we will provide. We will not disclose the personal information of any guarantor, including but not limited to their name, address, contact, or any financial information that could potentially allow someone to ascertain a guarantor's identity.

What am I investing in? Do I own a piece of property now?

When you invest in a Patch of Land offering, you are investing in a borrower payment dependent note (“BPDN”)—a promissory note in which the investor receives a stated interest rate for a stated term that is dependent on payment of the underlying loan between Patch of Land and the property developer. The BPDN is a contract between the investor and Patch of Land. Although the investor does not own any equity in the underlying property and their name is not on the property title, the BDPN gives the investor an interest—shared with the other investors who have funded the project—in the underlying property. The interest in the property is the right to receive monthly interest distributions as well as the return of principal upon the borrower's full payment of the underlying loan.

What are the interest rates on your offerings?

Interest rates differ for each loan and start at 7.5%. Because each loan is unique, the interest rate is determined based on many factors such as risk. However, because our loans are for short-term real estate rehabilitation projects, they generally carry higher interest rates than other debt instruments.

For the most current listing please view our Lending Parameters

Am I charged a fee as an investor?

Patch of Land may charge a fee between 0-3% of the loan amount, which assists in covering costs associated with administration, servicing, and compliance. Additionally, if a loan defaults, we and certain third-party vendors do take certain fees from late charges, default rates, extensions, workouts, and other additional monies collected in the workout process. A breakdown and explanation of fees is available in our Private Placement Memorandum and other investor documents. You can download the full set of investor documents here.

What is the duration of my investment?

Your money will be invested for the term of your specific loan. Loan terms generally range from 1 to 12 months. At the time of the updating of this FAQs, our average expected loan term is 6-8 months, and most full loan terms are 12 months. We state both the full loan term as well as the expected loan term on every note. Our loans have no prepayment penalty for the borrower, which incentivizes borrowers to repay loans sooner. Patch of Land keeps investors updated on the progress of the underlying real estate project association with their investment, and will notify investors if a borrower repays the loan amount early. 

For example, a “loan for 12 months with an expected term of 8 months” means that the borrower has told Patch of Land that it anticipates full repayment in 8 months; however, the actual loan term ends in 12 months and the borrower can continue the loan up to 12 months, all the while making those monthly payments.

Can I get my principal back at any time?

At this time, your principal (the amount you initially invested) will be paid back either at the end of the loan term or when the borrower repays the loan, whichever is sooner. Your principal investment amount is not liquid.

How are you able to offer such high rates?

Patch of Land offers short-term loans to real estate developers for real estate projects for refinance, property rehabilitation, bridge loans, and short-term purchases. Short-term loans tend to command higher rates of return. Private money loans, which may be used for real estate rehabilitation projects, command higher interest rates than traditional lending due to the inherent risk of the project. Such risks may include, but are not limited to, downward trends in the local real estate market significant enough to remove a profit motive for the developer, non-completion of the project, or catastrophe or disaster that destroys the property. On the other hand, these risks are often mitigated by careful due diligence, insurance, and other mechanisms. 

Why would borrowers borrow at such high rates?

Borrowers are likely paying similar, if not higher, rates elsewhere. They prefer Patch of Land due to our speed, efficiency, transparency, and ease of use. Also, our proprietary loan automation system, coupled with scale, gives us the unprecedented ability to lower transactional costs associated with each loan, unlike traditional mom-and-pop hard money and private money lenders.

When will I see a return on my investment?

Generally, monthly interest (calculated from the first to last day of the month) begins to accrue when an opportunity is considered fully funded. The first month’s interest distribution will be pro-rated. Monthly interest distributions occur on the 15th day of each month. For example, if you invest on June 19 and the opportunity is fully funded on June 23, you will receive an interest distribution on July 15 for 8 days from June 23 to June 30.  On August 15, you will receive an interest distribution for 31 days, from July 1 to July 31. At the maturity date of the loan or upon full repayment from the borrower, whichever is sooner, you will receive a balloon payment of the remaining principal and interest.

Is there an investment minimum?

Yes. The minimum investment is currently $5,000 per investment, unless a lower amount remains open for a particular investment opportunity.

What will happen to Patch of Land if mortgage and/or loan interest rates rise?

A rise in interest rates could have a dampening effect on the real estate market, making loans more expensive for borrowers. We cannot predict if or when loan rates will rise and how significantly rate increases may affect the opportunities for real estate rehabilitation and refinancing. Patch of Land believes that our ability to operate across diverse geographies and high interest rate environments allow us continued lending opportunity. We will be constantly monitoring the economic cycle and Federal Reserve movements as it pertains to our business.

What will happen to your business if the real estate market experiences another downturn?

While Patch of Land does not speculate on future market trends, opportunity exists in the real estate market at every point in its cycle. Rehabilitation and resale projects may be highly lucrative in an expanding market, while new construction and tenant improvements projects may show great opportunity in a market approaching its peak. During a market contraction, distressed real estate projects become plentiful and buy-and-hold rentals portfolios can show great promise. Patch of Land intends to provide access to lucrative investment opportunities that are well matched to the market environment in each stage of its cycle.

Are these investments risky?

Yes, similar to investing in the stock market, there is no guarantee when investing in real estate. The real estate market has economic cycles and it is difficult to know how and when economic conditions will change. We highly encourage investors to review the due diligence of each deal as well as the accompanying investor loan package, which includes an investor agreement, borrower payment dependent note, and a private placement memorandum detailing risks of the company and the accompanying real estate project.

Read more: Default Scenarios

Why aren’t you currently doing equity deals like your competitors?

At this time, we believe real estate debt is the best type of real estate investment available. Real estate debt offers a first lien position on property, while equity positions have mortgage-level, or a “last lien” positions on a property. Further, we currently only offer short-term debt deals which better guards against a downturn in the real estate market and is more liquid, whereas equity positions take a longer position (often 3-5 years), are more prone to fluctuations in the real estate market, and are more illiquid. For a more detailed discussion, please view click here.

Read more: Why Patch of Land Chose Debt-Based Real Estate Crowdfunding

What is prefunding?

Patch of Land was the first real-estate crowdfunding platform to pioneer the concept of “prefunding” loans. Every project we prefund demonstrates our confidence in the project, our underwriting process, and the thoroughness of our due diligence. By prefunding loans, we are able to secure higher interest rates and retain borrowers because we can guarantee quick closings. 

Does Patch of Land retain any position in the loan?

At this time, Patch of Land does not hold any consistent position across each of its loans. We allow investors to fill up to 100% of each loan that we prefund. However, we reserve the right to retain a position for each loan and may do so in the future. If a loan does not fully fund, we would retain a position in the loan because we prefunded it off our own balance sheet.

What happens to my investment if something happens to Patch of Land?

Patch of Land has several structures in place to protect investors in the unlikely event of anything happening to Patch of Land.

  • Bankruptcy-remote design: All offerings are issued from one or more special purpose entities (SPE) designed to be bankruptcy remote. SPEs are business entities formed in a manner designed to minimize the risk of becoming a debtor in a bankruptcy case. This means that if something happens at the Patch of Land, Inc., the SPE is designed so that its obligations are secure even in the event of the bankruptcy. Except in certain cases, all borrower notes and investor notes will be held by one SPE.
  • Indenture Trustee: Patch of Land's subsidiary SPEs have signed an agreement with an indenture trustee that steps into our shoes should an event of default ever occur. The indenture trustee will continue investor distributions and asset management should we ever file for bankruptcy, dissolve, or have some other event of default.

What happens to my investment if a borrower defaults on a loan?

Although Patch of Land makes significant efforts to keep the risk of loan defaults to a minimum, all loans have an inherent amount of risk; investors may lose their entire investment.

Patch of Land's approach to these situations is to work out any defaults as quickly as possible by collaborating with borrowers to understand why the project is in trouble, and to craft possible solutions. Further, Patch of Land is building a library of legal mechanisms and contingency plans for loss mitigation in each jurisdiction. Most importantly, the value of the property will determine the appropriate action. Possible courses of action could include extension of the loan term, Patch of Land’s stepping in to finish and sell the property, or incentivizing the original borrower to release ownership of the property. Patch of Land considers foreclosure to be an action of last resort. However, if such a situation becomes necessary, we have a third-party loan servicer who is equipped to handle foreclosure in all 50 states with reduced legal fees and much faster resolution times. The fees would come out of the recovered capital on the property. The impact it would have on our investors would depend on the state and individual project. An investor could potentially lose some of their initial capital if the net capital returned from a foreclosure/liquidation process is less than the loan funded. For more information on how we could handle a default or foreclosure scenario, please read here.

Why do you limit investments to accredited investors only?

Federal securities law requires that securities issued by private companies to their investors must be registered with the Securities and Exchange Commission (SEC) unless the offering qualifies for an exemption from registration.

One exemption from registration is available if the company offers securities only to accredited investors in a private placement offering. Accredited investors are defined by the SEC as (1) an individual who has earned at least $200,000 annually for the past two years and has a reasonable expectation of earning at least that amount this year; (2) a couple that has earned $300,000 annually for the past two years and has a reasonable expectation of earning at least that amount this year; or (3) an individual with a net worth of more than $1 million excluding the value of his/her primary residence.

Patch of Land has a private, password-protected network for accredited investors in order to meet these requirements.

Read more: SEC Approves Reg A+

What if more money is needed for a loan project?

During the course of our due diligence and research into each project application, we look into a borrower’s ability to absorb a cost overrun or timetable setback. Where unexpected expenses or delays cause a project to be significantly underfunded, Patch of Land may work with the borrower to find a solution. The best course of action is dependent on the particular circumstances of each project, and may include an additional loan, direct contracting between Patch of Land and a licensed contractor to finish outstanding construction work, an agreement to market the project early in a less-than-complete state, or possibly liquidation. Patch of Land will always work to resolve the situation in the best interests of the investors of that underlying project.

What are the tax implications of investing with Patch of Land?

While Patch of Land cannot provide legal or tax advice, we recommend that investors speak with their own accountant or attorney. One of the benefits of investing in real estate equity through Limited Liability Companies (LLCs) is that they can be taxed as partnerships and it allows for the entity to be “passed through”. For example, profits, losses and depreciation can be passed through to the investors, as applicable on equity investments.

How does the JOBS ACT impact Patch of Land?

The JOBS Act was signed into law on April 5, 2012 by President Obama; Title II of the JOBS Act became effective on Sept. 23, 2013. Patch of Land projects rely on the new Title II 506(b) rule. Rule 506(b) offerings are still private placements, however, sales of these offerings are limited to accredited investors only.

Read more: JOBS Act Review

I am not a U.S. citizen. Can I still invest?

Yes, but it depends on the circumstances and your nationality. Please contact us for more information. Note that if you have a U.S. social security number, you must invest as a U.S. citizen.

How does Patch of Land handle the signature of investor documents?

When the investment is published, you are able to review the investor loan documents. All signatures are executed electronically with a fully executed electronic version both emailed to you and accessible via your account’s investor dashboard.

What information is available about each loan and borrower?

Patch of Land is committed to providing detailed due diligence on every loan to every investor. When reviewing a loan, you can scroll through general information about the property and the business plan for the use of funds, as well as the appraisal/price opinion, comparable data sets, purchase contracts, and other information. We also provide detailed information about the neighborhood and surrounding area, full financial data, a risk profile, and a project timeline. We provide a background and profile on every borrower, along with an FAQ for investors’ questions. We strive to provide the utmost in transparency, by sharing due diligence, documents and data to help a potential investor make an informed decision. However, we regret to inform investors that although Patch of Land does review a guarantor’s credit report during the underwriting process, we do not share this piece of information publicly due to our commitment to financial privacy and compliance with the Fair Credit Reporting Act and Gramm-Leach-Bliley Act.

Read more: Transparency through Patch of Land's Platform, Patch of Land's Due Diligence

Is there an exit strategy if I need to cash out my investment?

No. Real estate investments have a longer-term time horizon than that of highly liquid stocks or cash instruments. Each investment will have a thoroughly detailed business plan that will outline the expected timeline to realize the investment, and loan terms range from 30 days to 18 months. Please read and understand each investment offering carefully before making an investment.

Can I invest using my SDIRA?

We do not accept investments from SDIRA accounts that require a custodian to disburse funds. However, we do accept investments from a "Self-Directed IRA LLC" or "Checkbook IRA," which allow you to use the LLC’s checking account feature to fund our offerings.

Is this a bond?

No, although it is similar to a short-term (6-12 months) bond since there is a fixed amount invested and fixed interest rate for a fixed term. 

Is this like a CD (certificate of deposit)?

No, this is unlike a CD because the amount invested is not secured or guaranteed by the FDIC. However, it may be comparable to a certificate of deposit only in terms of its relatively short duration (1–12 months).

Are loans on Patch of Land an alternative investment?

Yes. Investments beyond traditional stocks, bonds, and cash are known as alternative asset classes. Alternative asset classes can include anything from commercial real estate and private equity to racehorses and classic cars.

Be advised that alternative asset classes are not appropriate for everyone. All Patch of Land investors must verify their accredited investor status.  Patch of Land is not a registered financial advisor and does not make any financial recommendations. You should always consult a qualified financial or investment professional knowledgeable about your risk tolerance and objectives before investing in new opportunities.

How are your offerings different from a REIT?

REITs (real estate investment trusts) are investment vehicles that pool various real estate assets, including properties and mortgage notes. Managers of REITs receive a management fee, along with various other fees and charges based on performance. REITs can be either publicly or privately traded.  Unlike these mortgage REITs, a Patch of Land loan corresponds to a single project loan—not a pool of loans. You have full visibility into the loan as well as due diligence around the property, market, and borrower. 

How does Patch of Land underwrite the loans?

Underwriting is one of our highest priorities.  Quality projects and quality operators are paramount to our continued success. We currently use a rigorous traditional underwriting process and generally commission an independent third-party national appraiser for a full walkthrough and value analysis. We carefully evaluate the local market, the performance of that particular asset class in that market, and the risk profile of the borrower. We generally work with professional, experienced developers with strong track records in the real estate industry, and fund up to 80% of the LTC (Loan-to-Cost) of the property. That way, in a worst case scenario, we can liquidate the property and have a reasonable expectation of being able to return most or all of our investors’ funds. 

Patch of Land has also developed proprietary technology to provide a strong algorithmic understanding of the real estate that secures each loan. We are able to evaluate a large amount of individual data points in order to construct a risk profile for each property and to cross check the data being provided by independent appraisals or price opinions. This data enables our underwriters to make a more comprehensive analysis of each project and to increase the efficiency of our due diligence without sacrificing our standards.

Read more: The Underwriting Process, Due Diligence and Underwriting Process

What are the 5 Areas of Due Diligence?


Detailed inspection of fundamentals: what is the business plan, where, and for what purpose?

  • Property information and photos
  • Project timeline and budget
  • Zoning and entitlements
  • Architectural plans
  • Title report


Legal and security structure, rights, responsibilities, and remedies

  • Ownership / entity documents
  • Articles of Incorporation
  • Certificate of Good Standing
  • Investment Memorandum / PPM
  • Sponsor Financials


Analysis of macro-environment as it relates to project’s opportunities and risks

  • Property appraisal or price opinion
  • Market overview / summary
  • Market demographics
  • Comparables
  • Location map


Detailed inquiry into the experience and track record of sponsorship team

  • Financial statements of ownership
  • Litigation involving team members
  • Criminal background check
  • Prior bankruptcies or defaults
  • Conversations with references


Project capitalization structure (sources and uses) and repayment

  • Sponsor bank statements
  • Capitalization summary
  • Project pro-forma
  • Loan commitment
  • Conversation with bank

Read more: Debt Crowdfunding Due Diligence

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