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 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.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
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 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 is an online platform that provides debt and equity capital for commercial real estate.
Originations: August will be $14.67mm for the month
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
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
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 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.
