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Where Does Real Estate Crowdfunding Stand in 2020?

Real estate crowdfunding fell short of its original promise but a handful of companies are still flourishing

January 8, 2020 By Ryan Lichtenwald Leave a Comment

Views: 818

The real estate crowdfunding space has been an interesting one to watch. Just a few short years ago, in 2015 and 2016, there were many companies that seemed to be doing well with funds flowing into some large financing rounds. Today, there are just a handful that have stood the test of time. The rest? Some have gone out of business and others have gone quiet. The most notable companies which have shuttered in recent years include RealtyShares, which raised $60 million and iFunding.

The Wall Street Journal recently published a piece highlighting some of the success stories and what has differentiated some of these companies from the pack. Fundrise was founded back in 2012 and is probably the most unique when it comes to the investors they serve and how the investments are structured. The different investment offerings spanning more diversified eREITS to eFunds which focus on a specific city. For instance the Washington DC eFund aims to capitalize on how Amazon’s HQ2 will effect local real estate.

AlphaFlow and PeerStreet are well known names in the crowdfunding space. PeerStreet is a marketplace for individual accredited investors to access short duration real estate loans. AlphaFlow partners with online platforms along with offline real estate lenders to offer investors access to real estate backed loans. Up until recently Alphaflow, was also open to individual investors but have since shifted their strategy to focus on institutional money.

One of the factors that perhaps stalled the growth of pure play real estate crowdfunding is simply the massive amount of capital entering real estate in recent years. The rebound of the economy has meant that real estate developers have had many options when it comes to financing. This doesn’t mean that these companies haven’t been successful though. Besides those previously mentioned, and not included in the WSJ article, LendingHome and Sharestates are two that have achieved significant scale in the market today. Sharestates crossed $1 billion in loans in 2018 and LendingHome recently shared that they have crossed $5 billion. Besides their short duration loans, LendingHome is also getting into the single family rental mortgage space. New York based Cadre is also a quiet achiever, requiring a $50,000 minimum investment.

Many companies as evidenced above who originally focused on accredited investors have since shifted to institutional money, a much more efficient way to grow a lending business. The exception being Fundrise and Groundfloor which have stayed true to focusing on retail investors. Overall, while many of these companies were born at a time when many thought real estate crowdfunding was the future, they continue to resemble less and less platforms to democratize real estate investing.

Filed Under: Peer to Peer Lending Tagged With: AlphaFlow, Cadre, crowdfunding, Fundrise, LendingHome, PeerStreet, real estate

Views: 818

Recent Origination Milestones in Online Lending

We share several companies who have announced major origination milestones across small business lending and real estate.

December 6, 2017 By Ryan Lichtenwald 1 Comment

Views: 158

We are winding down the year and approaching the time when the news cycle starts slowing down and everyone begins to focus on family and the holidays. However, a few companies in the online lending space have snuck in announcements as we end out the year, sharing major origination milestones.

Kabbage

Today, Kabbage announced they had crossed the $4 billion mark. They have now lent to more than 130,000 small businesses which they claim is the largest customer base of any online small business lender. Other significant milestones for the company this year include their $250 million equity raise, securitizing $550 million and finalizing a $200 million revolving credit facility.

LendingHome

This week LendingHome announced it had crossed $2 billion in mortgage loans for homeowners and real estate investors. LendingHome is the largest originator in the real estate crowdfunding space. It took LendingHome 30 months to cross the first billion in originations and just 12 months to cross the second. Total originations are across 10,000 homes.

Funding Circle

Funding Circle UK crossed the £3 billion (approx. $4 billion) mark in small business lending for their UK business. They officially launched in 2010 and have served 30,986 small businesses across 43,300 loans. The company also announced that they have lent $5 billion globally, including $1 billion in the US. Funding Circle currently lends in the UK, the US, Germany and the Netherlands.

LendingClub

For a long time the Lend Academy team has wondered about the breakdown of originations across LendingClub’s products outside of consumer loans. LendingClub quietly announced total small business originations of $500 million since 2014 in a recent blog post. The focus of the blog post was to discuss their new credit policy to small businesses which reduced minimum qualifications. Their small business lending business pales in comparison to their consumer business, but given the new credit policy we could see this product line be a bigger part of the business going forward.

Conclusion

With the exception of the public companies in the industry, it isn’t often we get insight into originations at private companies. This is one reason we wanted to highlight them here and celebrate their successes. Having said that, we have all learned in recent years that origination growth isn’t the only metric companies should use to measure their success. Companies will ultimately thrive if they can continue to grow originations in a measured way while generating positive cash flow as well as yield for their investors.

Filed Under: Peer to Peer Lending Tagged With: Funding Circle, Kabbage, lendingclub, LendingHome, online lending, Originations

Views: 158

An Acceleration in Fintech Capital Raising

A look at a diverse group of fintech companies who recently raised capital

November 2, 2017 By Todd Anderson Leave a Comment

Views: 185

There has been a healthy level of new funding deals closed in recent weeks. What we want to do in this post is highlight some of these. This is by no means an exhaustive list but rather an interesting mix of fintech companies who have recently raised equity and/or debt capital. Seemingly every day there is a new capital raise or two; digital banks, blockchain startups, AI companies and insurtech firms have all raised capital

The recent CB Insights Fintech Trends Briefing points to the rise in fintech financings as Q3’17 saw 278 deals to VC-backed fintech companies, the largest quarter since Q1’12. While total capital invested is down 25 percent from Q2’17 to $4bn the pace of the deals show investors appetite for fintech companies is still very strong.

[Read more…]

Filed Under: Peer to Peer Lending Tagged With: BlueVine, credit sesame, Feedzai, Finova Financial, FS Card, LendingHome, Megvii Face++, OakNorth, RoofStock, SalaryFinance, Spotcap

Views: 185

LendingHome Announces $750 Million in Originations and Lender Protections

LendingHome continues to be the undisputed leader in originations and now has instituted lender protections.

August 10, 2016 By Ryan Lichtenwald Leave a Comment

Views: 161

LendingHome-Logo

Last year in our roundup of the leading real estate crowdfunding platforms we shared that LendingHome had originated over $200 million in loans. Now, just over a year later LendingHome announced today that they have originated $750 million in mortgage loans.

The vast majority of the $750 million in originations come from LendingHome’s primary product which is the fix & flip loan. Due to the shorter duration of these loans, LendingHome has already returned $300 million in principal and $25 million in interest to investors. The company has larger ambitions though and are currently testing out consumer mortgages. The LendingHome team told us that they are starting small with the new offering so they can focus on the customer experience, meet regulatory requirements and accurately determine creditworthiness.

LendingHome currently offers their fix & flip loans in 23 states, but 80% of originations volume come from ten states: Florida, Illinois, California, Nevada, Michigan, Texas, Maryland, Pennsylvania, Georgia and Missouri. Accredited individual investors on the platform now account for more than 10% of all loan originations and this percentage continues to climb.

The other big news from LendingHome today is the announcement of a bankruptcy remote vehicle (BRV) with the formation of LendingHome Marketplace LLC.  The BRV was put in place to protect investors from claims by creditors in the event of a LendingHome bankruptcy and seems to be similar to that of what consumer lender Prosper has in place. They have also structured an agreement with Delaware Trust to put in place backup servicing.

Investors in marketplace lending often talk about platform risk as an additional risk beyond the risk of the loans that they are investing in. Although a bankruptcy for some of the larger platforms is unlikely, investors should take comfort in knowing that they are protected from creditors and a backup servicer is in place.

LendingHome for Investors

For investors considering an investment in LendingHome the minimum investment is $5,000 per loan. Gross returns have historically been 11.07% less a 10%-of-interest servicing fee. Below are the performance highlights of the over 2,750 loans issued:

  • 6.74% delinquent rate (60+ days)
  • 2 foreclosures
  • Historical losses under 0.01%
  • LTV: 70.40% weighted average

Loan terms are 12 months with interest rates between 7% and 16.75% for borrowers but the average maturity is under 7 months. The short duration itself makes this investment more liquid than some of the other verticals in marketplace lending. For a more hands off approach investors are able to enroll in one of three auto invest programs with various target returns. The below figures were taken from LendingHome’s investor guide and are up to date as of March 31, 2016.

LendingHome_autoinvest

Conclusion

LendingHome is leading the way in real estate crowdfunding both in originations and now lender protection. The addition of a bankruptcy remote vehicle marks a maturing of sorts for this asset class. Investors can now be more confident that their investment is safe from external risks such as a platform bankruptcy. It wouldn’t be surprising to see their competitors follow suit as investors begin to demand such protections.

It’s important to note that this is only the beginning of real estate crowdfunding as it has the potential to outpace any other marketplace lending asset class in the US. What remains to be seen is just how long this will take. Although LendingHome’s growth has been impressive, they have only scratched the surface of the potential market opportunity.

Filed Under: Peer to Peer Lending Tagged With: bankruptcy protection, BRV, LendingHome, Originations

Views: 161

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ABOUT LENDIT FINTECH NEWS

LendIt Fintech News, Powered by Lend Academy, has been bringing you all the news and information about fintech and online lending since 2010 when it was founded by Peter Renton. We not only have the industry’s most active news site, but also the largest investor forum and the first and most popular podcast.

We are a team of fintech enthusiasts who have been covering the industry for many years. With a deep knowledge of online lending, digital banking, blockchain, artificial intelligence and more our team covers the daily news and writes in-depth editorials.

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