Meet The Top Players in Real Estate Crowdfunding

LargestRealEstateCrowdfundingCompanies

While the unsecured consumer loan marketplaces continue to grow at impressive rates and post ever higher originations, the niche of real estate crowdfunding is just getting started. This is one segment that is poised for growth and although there are many players, no one has established their dominance yet. But in the long run real estate crowdfunding could dwarf small business and consumer lending. This could be the next big industry.

For accredited investors there are lots of options of companies to invest with. For non-accredited investors like myself, the only option currently is GROUNDFLOOR, who recently announced the first regulation A+ deal. I personally have invested in physical real estate and although I enjoy self-managing and having complete control, this type of investing isn’t for everyone. There is a lot to like about real estate crowdfunding and although investing in Prosper or Lending Club has provided great returns, it is not backed by an asset. A high yield, short duration investment backed by an asset is appealing to many investors. Another benefit is the diversification that real estate crowdfunding offers. For smaller real estate investors, you are limited to investing locally unless you have a system and team in place to manage across the US. With real estate crowdfunding, you can diversify quite easily across many investments since loans are fractionalized. Investors looking to deploy $1 million are able to invest in a hundred properties or more.

In the future, it is not difficult to imagine that any serious real estate developer or flipper would utilize an online platform to get a loan because investment properties are treated very differently by the banks. You can learn all about investment property loans in this recent podcast with James Herbert from LendingHome. We will also see more residential property borrowers start to shift to online loans.

We reached out to many of the large real estate crowdfunding companies in this space in an attempt to feature them all in one place. To be included in this article, companies were required to provide us with either their total originations, originations for the last three months ending August 31, 2015 or their monthly volume for the month of August. For companies that provided a total originations number or originations for the last three months, we normalized it to get an idea of monthly originations. They are ordered by this number, but keep in mind these numbers are our estimates. Given that many companies are very protective of their data this should not be viewed as a definite list of the largest real estate platforms but more as a guide to some of the platforms that are getting early traction.

LendingHome-Logo

LendingHome leverages technology and a 100% online platform to reimagine the mortgage process as the simplest, fastest and most transparent mortgage lender for both borrowers and investors.

Originations: $200MM + (As of July 2015)

Monthly Normalized (Estimated): $25 Million

RealtyMogul-Logo

RealtyMogul.com is an online marketplace for real estate investing, originating debt and equity real estate investments for accredited and institutional investors.

Originations: $144MM total originations

Monthly Average (Last 3 months): $22 Million per month

SharestatesLogo

Sharestates is an online real estate marketplace, offering collateralized loans yielding 10%+ annually to both institutional and accredited investors.

Originations: June – Aug: 33 projects funded and accruing interest, $32.3 million originated between debt and equity

August Originations: $15.5 million ($1.3 million of which was equity)

RealtyShares-Logo

RealtyShares enables accredited investors to participate in vetted real estate deals. Sponsors are able to raise funds for their real estate deals in as little as 5 to 7 days.

Originations: $100M year to date

Monthly: $15 Million

 

iFunding-Logo

iFunding is an online platform that provides debt and equity capital for commercial real estate.

Originations: August will be $14.67mm for the month

 

 

LendZoan Logo

LendZoan offers a decade of experience in real estate, customized funding products, and a personal local expertise that sets us apart from other online platforms.

Originations: Originated $10.3M in August but had no originations in June or July

PatchOfLand-Logo

Patch of Land is a crowdfunding solution for real estate financing that brings together borrowers and lenders through a simple online interface.

Originations: $26.5mln in loans for the three months ending August 31st

Monthly Normalized (Estimated): $8.8 million

PeerStreetLogo

PeerStreet – PeerStreet is the leading marketplace-lending platform for real estate debt, allowing investors to easily invest in high-yield real estate loans that were historically very difficult to access.

Originations: The past 3 months: $21.9M

Monthly Normalized (Estimated): $7.3 million

 

 

AssetAvenue-Logo

AssetAvenue is the leading online lender for real estate investment properties. By injecting technology into every aspect of the lending process, the company provides property owners and brokers a better experience that values speed, transparency and certainty. Investors on the platform can participate in AssetAvenue’s Whole Loan Program, largely available to high net worth and institutional investors.

Originations: $100 million through August 2015.

Monthly Normalized (Estimated): $5 million

Conclusion

The real estate crowdfunding space will be an industry to watch in the next year. Based on originations, these companies are the most poised for growth. At LendIt USA 2015, we dedicated an entire track to real estate companies in this industry. As this sector grows, it will continue to be featured at LendIt and it’s possible that in a few years time there could be an entire LendIt conference dedicated to real estate crowdfunding. You can learn more about many of these companies by watching presentations and panels from LendIt USA 2015.

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Jim OLeary
Jim OLeary
Sep. 22, 2015 7:11 pm

Do you have any data on the rate of return on investments with the various platforms?
How well capitalized are they and how long have they been in business?

Raz
Raz
Sep. 23, 2015 12:17 pm
Reply to  Jim OLeary

As part of an asset backed (real estate) business lending platform, and knowing these guys pretty well
1. All are under 5 years old – most are actually under 2 years of actual operation
2. Most are venture backed
3. Exact rates of returns is not public information as deals are private placement. Although patch of land does publish return rates as they can generally solicit under their business model/choose to operate under that legal framework.

Hope that helps.

Loren Picard
Loren Picard
Sep. 23, 2015 12:59 pm

Very nice summary of all the leading players in one place. When thinking about scaling commercial real estate lending platforms (I’m excluding 1-4 resi rentals and fix-n-flips which comprise a very small part of the overall CRE lending universe) i see not one scaling issue, but three potentially incompatible scaling issues:

1) Customer acquisition in CRE lending is very hard to scale, particularly when targeting income property investors who mainly focus on price. It is probably fair to say that most active real estate owners know who the local lending players are in their market. Customer service is important with certainty to close probably ranking right behind price. In a limited number of cases speed to close is important, but for most income property investors I have met over 25 years, it comes down to price and certainty. Marketplace lenders, by definition offer higher returns for higher risk, and thus competing on price (i.e., out competing banks and CMBS execution) could limit any hyper scaling required to bring the model to its envisioned future.

2) Income properties by definition are lumpy, unique story assets. No two commercial properties fall into the same story box. From sponsorship, lease rollovers, lease structures, capex, environmental, structural, and numerous other data points make these types of loans hi-touch. I believe there is potential for some augmentation assistance that technology can bring to the process, but augmentation is a whole lot different than automation. Technology will be best used finding the exceptions to the underwriting templates–at which point the conveyor belt stops and a human will need to intervene and problem solve (think problematic Phase I environmental report, clouded title report, or misrepresented leasing terms and don’t forget about finding that Walmart that just opened down the street from your client’s community retail center). This is an extremely hard scaling problem and to date I have not run across a model that has solved it.

3) Scaling the back-end investor-capital component is another very hard aspect to scale. Typically investors will provide commitments (whether on a loan-by-loan basis by accredited investors or a high yield investor committing to funding a large amount of assets up to a specific limit) which can include caveats allowing for the investor to cease investing. To overcome this potential hot-money obstacle, to scale the capital back-end will require access to permanent balance sheets that hold debt (or equity) capital and that such a balance sheet does not disappear during market duress. This balance sheet should also be attached to the capital markets which rewards it with new capital given its excellent performance. There are very few of these animals around. The GSEs, banks, and the CMBS market are formidable competitors who have figured out their scaling models. By definition, for marketplace CRE lenders to scale the capital back-end they will have to do it better than the incumbents–not impossible, just difficult given the other scaling challenges.

That is my take on the scaling issues facing income property marketplace lenders.

Raz
Raz
Sep. 23, 2015 1:57 pm
Reply to  Loren Picard

Excellent points Lori. Real estate marketplace can never truly be marketplace lending – the biggest player I see is Fundrise and even that after 4 years is no where in the same stratosphere as LendingClub.

Stephen D Heath
Jul. 1, 2016 9:08 am
Reply to  Loren Picard

Excellent analysis and defining the real issues in technology replacing the human element
CRE is truly never cookie cutter to do that places undo risk on borrower and investor alike

Awen
Mar. 4, 2016 6:09 am

Great list of real estate crowdfunding companies, but you missed out Crowdfund.co. It is a Crowdfunding platform that allows investment opportunities for both accredited and non accredited investors.
Thanks!!

Ryan Lichtenwald
Ryan Lichtenwald
Mar. 4, 2016 8:20 am
Reply to  Awen

Hi Awen, thanks for making us aware of Crowdfund.co. We focused on some of the largest companies we are aware of in real estate crowdfunding. Please feel free to keep us updated on Crowdfund’s progress.

Doug
Aug. 22, 2016 6:21 pm

Hello Ryan & Lend Academy team,

We at RealtyMogul.com appreciate the mention, and our traffic shows some people have visited us after coming here – so thanks again!

We’re also excited to share that we are now accepting Reg A+ investors in our recently launched product, MogulREIT I.

Happy Investing,
Doug at RealtyMogul.com