16 Oct 2013
Crowdfund that fix and flip
The topic of crowdfunding has gained momentum of late as seen with the increased popularity of events such as the current Crowdfunding Roadmap conference in Las Vegas. While companies like iFunding and Realty Mogul are strictly for real estate investing, there are other crowdfunding websites that raise money for any sort of project including, but not limited to those related to real estate. One of these unique websites is Prosper, a peer-to-peer financing site that can help investors and homeowners raise money for a variety of reasons.
Ron Suber, Head of Global Institutional Sales at Prosper, bought the 8-year-old website in January 2013 with Aaron Vermut and Steve Vermut after using it to fund several of his own personal projects. Experiencing Prosper’s success first hand gave Ron the confidence to purchase the platform when he was presented with the opportunity.
The process starts on the borrower’s side. Let’s say someone wants to do some improvements to a house they want to flip. They would log onto Prosper and enter their loan amount, purpose for the loan and their credit quality. Prosper quickly calculates an interest rate based on these 3 facts that the borrower can accept or deny.
If they deny the terms, they can either start over or leave the website with no loan. If they accept the terms, the borrower can then give Prosper their information in order to validate who they are. Once validated, their request is posted on the platform for lenders to contribute.
“The website helps borrowers who either have no money for their projects or too much debt to connect with crowdsourced lenders with money.” Ron explains.
With multiple lenders for each individual loan, which can range from $2K-$35K, Prosper allows loans to reach their goal in days so that lenders can begin collecting on their interest sooner. Lenders also receive higher interest rates through the website when compared to the various investments options available at a traditional bank. Interest rates on loans are fixed and are either 3 or 5-year terms.
While Prosper is not solely for real estate investors, many of the loans are for home improvements such as rehabbing bathrooms or kitchens, with a noticeable number looking to go green by add solar panels to their property.
“We’ve had a lot of success in working with people in the real estate home improvement area with many of our lenders interested in that borrower category,” Ron explains. “And those borrowers have been some of our most quality loans as well.”
Ron predicts that by the end of the year Prosper will be doing $50M in loan origination. There is no charge to receive your loan rate and you can sign up for free account on Prosper.