RE Crowdfunding Loans
Using Crowdfunding Portals to Finance Commercial Real Estate
Crowdfunding Portal Loans
Since the JOBS Act of 2012, there has been an explosion in the number of crowdfunding portals dedicated to real estate investment. That legislation opened up the ability to broadly solicit investors to private investing opportunities for the first time in nearly a century across the US. We've seen an evolution from simple equity crowdfunding for real estate deals, to many different flavors of online lenders today.
Borrowers using crowdfunding portal to finance commercial real estate are willing to accept a higher interest rate (9%-12%+) in order to get additional funds from a wider pool of investors than they would typically be able to solicit and manage on their own. Because of the higher rates, typical uses for crowdfunding include raising preferred equity or mezzanine financing, or obtaining financing for an asset or borrower than would not be eligible with a bank loan.
Loans from any crowdfunding portals have the advantage of being interest-only. This allows the borrower to preserve cash flow from a property despite the higher interest rate.
Crowdfunding portals fill many different niches in the lending market. This means the terms, financing amounts, rates, and maximum leverage can vary. Many portals prefer to specialize in certain asset types, geographies, or financing scenarios. Finding the right loan for your funding scenario means finding the right crowdfunding or online lending partner.
$1 Million - $10 Million+
1 - 3 years
8% - 12%+
- Flexible underwriting
- Wider pool of investors
- Non-Recourse loans available
- Varies by lender
Required Documents for Underwriting
- Current rent roll
- Last 2 years operating statements
- Schedule of Real Estate Owned
- Personal Financial Statement (for Guarantors)
How to Get Crowdfunded Capital
You can find literally hundreds of crowdfunding portals for real estate online today. It's hard to know if you're working with a reliable partner that won't waste your time, and whether they are a direct lender (vs a simple portal that might not raise the full amount of capital needed). When you use StackSource, a dedicated capital advisor will help you fund your loan using our network of reliable crowdfunding options, and we can help structure the right financing solution.
Guide to Crowdfunding Fund Loan Scenarios
Some borrowers use online lenders to fund acquisition loans. Portals that can close quickly by lending directly give the borrower the flexibility to close quickly, which is sometimes the difference between a successful deal and a missed opportunity. After closing, the borrower can look to refinance the property with other lower rate loan sources.
Some crowdfunding options will be a great fit for subordinate, mezzanine debt. They "sticker price" of the rate may not be attractive as a senior loan, but as a replacement for providing more equity to a deal, can definitely come in handy.
Like the subordinate debt option, this is higher up the capital stack than a typical commercial mortgage loan, which would be considered the "senior" position. Because the crowd would participate as equity investors, this could be a good option for those in need of additional equity dollars.
Learn More About Commercial Real Estate Loans
Online lending in the commercial real estate industry is still in its very early stages (via National Real Estate Investor).
So you’re a real estate investor. Maybe you’ve bought and flipped a bunch of houses, or even built a few. But now you’ve crossed over 5 units, or into retail, and you’re in commercial loan territory. Everyone has a first commercial loan. To make sure you’re getting a good deal, you need to know your stuff.
Online lending, automated underwriting, and more. From 2017.