New Crowdfunding Firm Focuses on Alternative Mortgage Financing

By @vitthernandez on
People walk past apartment blocks in Stockholm April 8, 2014. Four out of 10 borrowers in Sweden are not paying off their debt and on average it takes Swedes nearly a century for those who are paying off principal to clear their mortgage debt. Swedish property prices have nearly tripled in just two decades. In July, home prices rose at a double-digit pace from a year ago - the first time in more than four years. Picture taken April 8, 2014. Reuters/Ints Kalnins

A newly launched crowdfunding platform will be focusing on raising funds for non-bank lenders that provide short-term commercial property loans to small individuals and businesses looking at real estate investing, a report on Bloomberg said.

The brainchild of former TripAdvisor lawyer Brew Johnson and former Google executive Brett Crosby, the crowdfunding firm, PeerStreet, Inc., will be teaming up with non-bank lenders that aim to finance the commercial real estate investments of clients "at a time when banks are reluctant to lend," according to the report.

The report said that initially, investors would be required to shell out $1,000 per deal with PeerStreet. The two founders did not share their funding goals for the company.

"Ideally we'd like to let as many people as possible in the future," Johnson told Bloomberg. Currently, however, only accredited investors are allowed to invest in PeerStreet-and crowdfunding platforms in general-due to the JOBS Act.

PeerStreet's partners include Los Angeles-based debt fund operator Thorofare Capital, Inc., which recently funded a $28 million bridge loan for a multifamily portfolio buyout in New York City. The company funds short-term loans between $2 million and $25 million nationwide.

As a crowdfunding partner of PeerStreet, a percentage of the debt will be held by debt-fund operators on their balance sheets, allowing them to release high-quality loans while relieving crowd investors of a huge burden of the risk, according to the Bloomberg report.

Another benefit of PeerStreet for debt-funders like Thorofare is that the crowdfunding platform eliminates the risk of securitisation which has the potential to "dry up" private lenders as what happened during the housing crash, the report noted.

Michael Burry, noted hedge fund manager, is convinced PeerStreet will become a game-changer in the sector. It's the reason he's putting his money in it.  

"These guys are really out to solve a market inefficiency," Burry told Bloomberg. "A number of large markets are not adequately being served by the financial sector, so it really is time for new thinking."

The real estate sector is long overdue for industry disruptors like crowdfunding that ease the burden of real estate investing for both consumers and proprietors. In the real estate technology segment, digital media companies like Realbiz Media Group, Inc. (OTCQB: RBIZ) are changing the marketing landscape by providing real estate professionals a new avenue to promote themselves and their business.   

RealBiz Media's, for example, aims to bestow agents control over how they want to run marketing campaigns for their listings. The portal has been launched at a time when the only means for agents to capture leads is to buy them from listing companies and websites.

"'s mission is to both empower the real estate agent and to connect the homeowner and homebuyer directly with the agent in a personalized and meaningful relationship without interference from large, impersonal, third party lead generation sites," Realbiz Media President and Chief Revenue Officer Steve Marques noted in a statement.

"Homebuyers are able to create personalized video collections of potential homes to be set-up for review and sharing. Agents can quickly bring their listings to life via RealBiz's rich video conversion tools, and market their properties directly to homeowners and homebuyers in a personalized, customized, entertaining, and engaging format no matter where they are," Marques said of the platform.

RealBiz is a publicly traded company. Its stocks closed at $0.13, up by 8.25 percent from its previous close.