ShareAs U.S. real estate becomes an increasingly attractive asset to investors due to improving property fundamentals and rising values – the financing industry is evolving to meet the growing need for debt capital.
Historically, banks have served as the primary source of capital for real estate loans, followed by government agencies, life insurance companies and CMBS lenders. However, recent regulatory and technological advances have allowed a new, emerging breed of alternative online lenders. These lenders offer commercial real estate professionals an additional avenue for helping their clients secure financing for their deals, especially if they are having trouble getting loans through traditional sources.
Banks certainly continue to play an important role in financing real estate transactions. Last year, local and community banks served as the primary source of capital for NAR members’ clients, accounting for 32 percent of financing transactions, followed by regional banks, which were responsible for 26 percent of deals, according to NAR’s most recent Commercial Lending Trends report. It was private investors, however, who served as the third biggest source of deal funding for NAR members’ clients in 2014, accounting for 11 percent of transactions.
For NAR commercial members, one of the biggest challenges they experience in securing financing from traditional lenders is that they typically manage transactions that fall outside of traditional lending parameters. Their clients tend to invest in smaller deals that usually involve properties located in secondary or tertiary markets. These deals are generally too small for lenders, such as international banks, larger private equity firms and CMBS shops that need to focus on multi-million-dollar transactions for efficiency. In 2014, even local and regional banks reported that their average loan size was $5.4 million, according to research firm Real Capital Analytics. Additionally, traditional lenders look to mitigate risk by preferring to invest in properties located within strong primary markets. They also tend to prefer borrowers who already have pre-established relationships with them.
As a result, securing financing for smaller, more unconventional deals remains an issue for NAR members. According to the Commercial Lending Trends report, 42 percent of NAR members’ sales fell through last year as a result of financing-related challenges. In 19 percent of cases, a shortage of financing options was to blame. In another 62 percent of deals, the underwriting standards proved too rigid. In consequence, 58 percent of surveyed professionals felt that lack of sufficient bank capital for commercial real estate transactions was an obstacle to closing sales. That situation is changing slowly, if at all—the Federal Deposit Insurance Corporation’s (FDIC) Senior Loan Officer Opinion Survey for July 2015 found that the majority of bank officers felt their institutions’ standards for originating commercial real estate loans remained the same as in the first quarter of the year.
Online lenders, such as Los Angeles-based AssetAvenue Inc., may offer a solution. The firm’s core clientele is made up of professional real estate investors looking for small balance bridge loans that they have trouble financing elsewhere—a perfect fit with the types of clients typically served by NAR commercial real estate professionals. AssetAvenue connects these borrowers and brokers with institutional quality capital sources through its online lending platform and can help them finance commercial bridge loans ranging from $3 million to $20 million. They make it easier for investors to secure flexible loan terms and to close deals in just a few days instead of a number of months.
AssetAvenue can also be a great resource for borrowers and brokers looking for residential rehab loans. In addition to offering flexible underwriting and fast closings, they also provide instant online quotes with custom terms. They are dramatically improving the traditional application process by providing a simple and intuitive online experience with transparent pricing. Borrowers and brokers can manage the end-to-end application for all of their loans through their personalized online dashboard. Available 24/7, AssetAvenue gives borrowers and brokers the power of convenience, allowing them to complete things whenever and wherever they want.
“We are using technology to improve a typically slow, labor-intensive and paper-driven process of applying for and securing a loan,” according to David Manshoory, CEO and Co-founder. “This involves using technology to remove the friction and make the process faster and more streamlined from time of application to completed funding. We currently offer automated loan pre-qualifications and pricing for residential rehab loans for borrowers and brokers, providing them with a menu of loan options to choose from that suit their specific financing needs. And in the coming months we will be offering pre-qualified instant pricing for commercial loans.”
AssetAvenue is one of a growing number of online real estate lenders. According to research firm Massolution, 85 different real estate crowdfunding platforms funded approximately $1 billion in loans in 2014. By the end of 2015, the industry is projected to more than double, reaching $2.5 billion in funded loans. As online lenders clearly continue to play an increasingly important role in real estate financing, it is critical that brokers and borrowers include them in their arsenal of funding tools.
AssetAvenue
1100 Glendon Avenue, Ste 1800
Los Angeles, CA 90024
P: (855) 277-4055
Email: loans@assetavenue.com
Website: www.assetavenue.com
Company Overview
AssetAvenue, a NAR REach® Class of 2015 company, is the leading online lender for real estate investment properties and has become one of the fastest growing start-ups in the industry in its first year. The company is radically reimagining how real estate loans for investment properties are sourced, underwritten and funded. By injecting technology into every aspect of the lending process, AssetAvenue is giving borrowers a better experience that values speed, transparency and the certainty of execution in funding the loan. Brokers and borrowers alike can apply in minutes, get instantly prequalified and be funded in as little as 10 days. AssetAvenue is a premium non-bank lender offering institutional capital at the most competitive rates and flexible terms possible.
Residential Investor Rehab
- 1-4 Unit Non-Owner Occupied
- Loans $350K-$5M
- 6-18 Month Terms
- No Income Requirements
- Up to 80% LTV & 100% Rehab
- Rates Starting at 7.99% + 2 pts.
Residential Investor Non-Rehab
- 1-4 Unit Non-Owner Occupied
- Loans $350K-$5M
- 12-18 Month Terms
- Up to 65% LTV
- Rates Starting at 7.99%
- Foreign Nationals Welcome
Commercial Bridge
- Office, Retail, Industrial, Multifamily
- Loans $3M to $20M
- 12-36 Month Terms
- Rates Starting at 7.99%