Million Acres recently ran an article discussing the pros and cons of P2P lending in real estate investing. The advantages listed include easy borrowing, low-interest rates, and low origination and closing fees. These are certainly advantages to investing in real estate through P2P lending platforms, but the article fell short of listing some of the best benefits. One reason may be that it targeted borrowers and left the benefits to lenders untouched.
Let’s discuss a few more benefits to real estate investing through P2P lending, those for borrowers and lenders:
Pros to P2P Lending for Borrowers, Developers, and Real Estate Deal Sponsors
While deal sponsors, borrowers, and real estate developers can often get better deals through real estate P2P lending platforms, not to mention the convenience of applying for loans more easily, there are other benefits to using a P2P lending platform to obtain a loan or to finance a deal. Here are three more benefits:
- Financing a real estate project can be structured as either debt or equity, so flexibility is key. Instead of taking out a loan, which you have to pay back, you can offer equity to your funders in exchange for their capital. In this case, it isn’t P2P lending so much as equity crowdfunding;
- Whether your financing is structured as a loan or debt, you are not tied to a single entity as your funding source. These platforms exist to allow multiple parties, individuals and institutions, finance real estate projects they believe in;
- Another benefit of using a P2P lending platform, or marketplace lending platform, is the speed of delivery for the capital you seek. If you apply for a loan through a bank or traditional lender, the application process could take a couple of weeks, and it could be several more before you see your money. With platforms like Sharestates, you can get access to financing in days.
The Benefits to P2P Lending for Real Estate Investors
Developers and deal sponsors are not the only ones who benefit from P2P lending. Project funders also benefit. Here are three ways investors benefit from using real estate lending platforms:
- Portfolio diversification. If you’re a serious investor, you’re likely invested in several different asset classes. P2P lending can be another asset class to help you diversify your portfolio.
- Multiple deals to choose from. With P2P lending platforms, you can spread your investment across multiple properties on the same platform. You are also not limited to debt or equity capital structures. You can invest in both, further diversifying your portfolio.
- It saves you time. With P2P lending and real estate investing platforms, there’s no need to drive neighborhoods to find properties to invest in. You can find suitable properties at your fingertips already vetted by real estate investing experts. Sharestates’ 34-point underwriting process ensures that deals you are presented with meet the strictest standards including LTV, potential ROI, and deal sponsor experience and track record. That means you can fund more deals in a shorter period of time while increasing your return on investment.
P2P lending, marketplace lending, and real estate equity crowdfunding have been around long enough to have a track record. Investors are earning respectable returns on good properties across a spectrum of choices including deal structure, type of property, and geographical location. We have officially entered a new age of real estate investing.