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But while acquisition costs are rising, borrowing costs are falling. Safakis said borrowing costs — traditionally the highest in residential lending — are tumbling as more online lending platforms compete for customers. Real Estate Crowdfunding Platforms Flippers are increasingly looking for new and creative ways to finance their flips, and crowdfunding is a popular source of funding, according to Nav Athwal, chief executive officer and founder of RealtyShares , an online crowdfunding fix- n-flip short-term lender. “We’re a national platform but most of our short-term loans are in six or seven states, including California, Texas, Illinois, New Jersey and Florida,” said Athwal, a real estate attorney and electrical engineer by training. “Flippers are our core business. We’re geared towards flippers. Since hard money lenders are too expensive, we are an attractive alternative for real estate flippers.” bridge loans or asset-based loans, give flippers cash for home purchases and construction with about a year to repay. Hard money loans are for a short period of time — usually one year or less — with interest rates much higher than bank loans. Hard money lenders are a higher risk for flippers because they can expect to pay higher interest rates, ranging from 14 to16 percent, plus origination fees on top of the high interest rate. Hard Money Lenders Hard money loans, also known as
Flippers are our core business. We’re geared towards flippers. Since hard money lenders are too expensive, we are an attractive alternative for real estate flippers. Nav Athwal | CEO and founder of RealtyShares San Francisco, CA
RealtyShares, however, charges interest rates as low as 8 to 12 percent on a short- term renovation loans, with a 2.5 percent origination fee. “Over the last year, we have seen a lot more capital flow into the fix-n-flip market,” said Athwal, whose platform originates, underwrites and services loans. “Flippers are leveraging our platform to do more projects. California has always been a high volume market for us. Cities like Los Angeles, San Diego and the Bay Area are active flipper markets.
We’re seeing a lot more deals above $500,000 in California.”
Real estate investors pumped $2.5 billion into crowdfunding platforms like RealtyShares in 2015, according to Massolution , a Los Angeles-based crowdfunding research firm. That’s more than biotech, alternative energy, tech wearables, online gaming and social media start-ups combined, reports the Los Angeles Times .
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