To further Leverage.com’s mission of democratizing knowledge about commercial real estate, we started an interview series with all kinds of CREF pros: everyone from multifamily and medical to cannabis and construction. This time we connected with the team at Crowd Lending, a company that links accredited investors with real estate developers by providing a vertically integrated lending platform.
Here’s how the conversation went:
What makes Crowd Lending unique?
Crowd Lending, Inc. offers investors an opportunity to invest in real estate without investing their time in real estate. We provide an alternative, asset-backed investment opportunity that has consistently provided annualized returns above our targeted 8% year after year, including 9.25% in 2020.
Investors have the option to withdraw these dividends quarterly or reinvest to compound interest with zero additional fees. Because of our multiple streams of income and layers of protection, Crowd Lending is a unique opportunity to diversify your portfolio and create passive income in a low-risk, high-yield environment.
Real estate is the safest and oldest investment you can make. There’s always going to be a need for housing, and there’s always going to be a need for capital to get that housing to a position where people want to live there.
We’re a very regional company, and our 40+ years of real estate experience gives us an advantage in the greater Boston area. Our entire team has that same innate knowledge of the real estate market.
With Crowd Lending, you’re not investing in a single property. Your investment is spread out across our entire — thoroughly vetted — real estate portfolio. In turn, our investors have an advantage in the real estate sector, as well as portfolio diversification.
What types of people and professionals tend to invest vs. borrow?
On the investor side, it ranges. We have people who are older, soon-to-be retirees or currently retired accredited investors seeking an investment opportunity to generate passive income. We have people who are younger, investing now to secure their financial future or save for their children’s college education and benefit from compound interest.
Then there’s everywhere in between. Our mid-life stage investors are looking to grow their financial wealth and diversify an existing investment portfolio. These investors want the option to receive dividends or reinvest but also remain buffered from risk to attain their future goals.
As an investor, you can also use your current IRA or rollover your old 401K and invest in Crowd Lending’s Retirement Fund. Our Retirement Fund allows you to invest your retirement money directly in real estate while avoiding UBTI (unrelated business taxable income), something that can be quite difficult with direct real estate investing, even in an IRA.
This type of income stream and exposure to real estate has primarily been exclusive to large institutional investors. Through Crowd Lending’s Retirement Fund, it’s now available to the accredited individual investor.
Our typical borrowers are real estate professionals with valuable real estate opportunities looking for fast capital and secure financing to either purchase, fix and flip, or refinance a property.
We base our loans on the end value of the property as opposed to its current value, which is where our years of experience in real estate truly gives us the advantage. Crowd Lending is a vertically integrated, regional direct lender that sources, underwrites, funds and services real estate loans throughout the Northeast. Because of these capabilities, we can deliver a fast, flexible and reliable borrowing opportunity for builders, developers and real estate investors.
What are the pros and cons of providing both investment and lending capabilities?
By providing both investment and lending capabilities, we can take a property in a nice area that may be dilapidated and turn it into a wonderful three bedroom, two baths for a new family to move into. We get to see the transition of these projects from start to finish. Because of our ability to finance these properties, we are able to provide a return on investment for another family compounding interest in our fund, potentially saving for their children’s educational future. It’s a win-win.
Where does Crowd Lending fit into the CREF technology landscape? What pain points is it addressing?
Crowd Lending has started to lean more heavily toward residential real estate as opposed to commercial. Nonetheless, our commercial loans are treated the same as our residential loans. This consistency keeps the process unencumbered.
We’ve recently upgraded our software to Liquid Logics. This software upgrade streamlines the underwriting process, allowing us to view and underwrite deals quickly, in turn, helping our key partners (appraisers, originators, title companies) work in unison. Having everybody on the same platform has made the process much more efficient.