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Online lending platforms for real estate set to grow

On Behalf of | Apr 25, 2016 | Commercial Real Estate |

California real estate developers may want to look into non-traditional lenders for their projects because increased regulation on banks and other sources of debt is going to make getting existing loans refinanced and loans for new construction more difficult. These regulations are due to take effect at the end of 2016. However, this opens the way for a number of non-traditional debt sources, including online lending platforms.

Crowdfunding is one such platform. It involves pooling money from many investors. With peer-to-peer platforms or marketplace lending, borrowers and lenders are matched up online. This has an additional advantage over traditional lending in that it can happen much more quickly.

A number of different types of products are offered by these lending platforms, and all have advantages and disadvantages. Permanent and bridge loans are usually secured, so they are less risky. Investors get the opportunity for a permanent stake in the real estate with equity loans, but there is no guarantee or duration or return rate. Lenders to commercial real estate projects are more likely to receive regular payments.

Online lending platforms such as crowdfunding may give many more people the opportunity to become involved in real estate development. People who are interested in these matters may want to work with an attorney. Whether people are new to the industry or experienced they may benefit from legal advice. The work and potential complexity of owning and developing real estate does not simply stop with the purchase of land. There will be leases and other contracts to negotiate and zoning and other regulatory hurdles to surmount as well.