This marks Realty Mogul’s first foray into rehab loans.
Direct Lending Investments, whose President Brendan Ross was featured in a Bankless Times profile this past January, focuses on high-yield, short-term small business notes, and Realty Mogul’s ability to deliver a specific segment of attractive borrowers made them an attractive partner.
“Investing in Realty Mogul’s real estate loans is a natural expansion for our fund, which has purchased more than $100 million worth of online small business loans since inception,” Mr. Ross said. “Continuing our tradition of working with only the best online lending platforms, we’re excited to expand the fund’s repertoire of peer-to-peer loans to include high-yield real estate assets.”
Mr. Ross also spoke about what attracted Direct Lending Investments to Realty Mogul.
“Small business overpays for credit, making them the most attractive risk-adjusted borrowers in today’s credit landscape,” Mr. Ross said. “Businesses that do residential fix and flip are no different from other small businesses: they are underserved by banks, they need underwriting to happen quickly, and they value a partnership with their lender that helps them grow. Jilliene and her team can deliver these borrowers to Direct Lending Investments, and I always need attractive ways to deploy capital.”
Delivering borrowers en masse is one thing, but bringing in quality borrowers is another. Direct Lending is counting on Realty Mogul’s due diligence to deliver quality, low-risk borrowers. Realty Mogul CEO Jilliene Helman sees no problem. “These are experienced fix and flippers.”
The cash infusion from Direct Lending Investments is but the latest in a series of institutional investments in crowdfunding and P2P platforms as those institutions look for better returns than the ones being delivered by more traditional players. It is also yet further confirmation of crowdfunding’s entrenchment as an accepted investment vehicle.
“This partnership marks a tipping point in the lending industry as Realty Mogul’s online crowdfunding platform is now attracting institutional level investors seeking opportunities to invest alongside our crowd of more than 12,000 accredited investors,” Ms. Helman said.
Real estate crowdfunding is designed in such a fashion that it should remain attractive for some time, Mr. Ross suggests.
“Real estate crowdfunding is especially interesting because it is the first well-collateralized type of crowdfunding. Collateralized lending has traditionally been a sweet spot for banks, and now we have Silicon Valley challenging banks in their strike zone. The partnership between Realty Mogul and Direct Lending Investments demonstrates that this new form of securitization, which we can call crowdfunding or marketplace lending, has legs that will carry it further into lending territory traditionally dominated by banks.
The partnership with Direct Lending investments is the latest in a string of good news for Realty Mogul, which attracted $9 million in venture funding earlier this year.