Patch of Land
|Online real estate crowdfunding|
Los Angeles, CA,
Patch of Land is an online peer-to-peer or 'peer-to-professional' real estate crowdfunding marketplace that connects professional real-estate developers needing to finance their real-estate projects to willing lenders or real-estate investors. Patch of Land focuses uniquely on relatively short-term (typically 6–24 months) real-estate debt or fixed-income loans (as opposed to real-estate equity investments) and, like a mortgage, all their debt-investments - offering returns typically between 8% to 14% annually - are fully secured via first lien by the underlying real-estate property, as well as a personal pledge by the borrower.
Patch of Land brought real-estate bridge financing, also sometimes known as "hard money lending," nationwide and online. In hard-money or real-estate bridge financing, a loan is both secured-by and determined-by the value and quality of the underlying property rather than [exclusively] by the creditworthiness of the borrower, as with more conventional lending. Real estate bridge-financing has historically been an inefficient, offline, hyper-local market where lenders must personally know who the best local real-estate developers are, and which tracts of land, parcels, buildings, properties, streets or neighborhoods offer the most promise for price stability and appreciation. Conversely, real-estate developers needing funds for their projects were historically forced to seek-out and pursue local financiers, magnates, bankers, capitalists or other lenders rather than spend time doing what they know best: construction & renovation.
Patch of Land and other online real-estate crowdfunding pioneers enabled real-estate developers to focus their time and effort on identifying real-estate opportunities, building, renovation, and construction rather than compiling paper loan-documents or foraging for willing lenders. At the same time, Patch of Land also enabled accredited investors wishing to invest in real-estate as an asset-class (as opposed to as one's primary home) without needing a prohibitive amount of freely available investible funds.
Patch of Land was initially established by Jason Fritton, Brian Fritton and Carlo Tabibi in 2012 in Los Angeles, California shortly after congressional passage of the United States JOBS Act making it one of the earliest providers of online Real-Estate Crowdfunding. Jason Fritton of Patch of Land was among those who lobbied the US Congress for the inclusion of real-estate crowdfunding in the final draft of the JOBS Act. AdaPia d'Ericco (Chief Marketing Officer) and Amy Wan (General Legal Counsel) were among Patch of Land's early employees.
Patch of Land's products differ from equity-investments or unsecured-loans such as those offered by Lending Club￼￼ since, in the event of a borrower's default, Patch of Land can usually foreclose on the underlying property, sell, and recoup the investor/lender's investment including due interest (assuming a low enough LTV.)
As one of the earliest real estate crowdfunding platforms, Patch of Land is considered by those in the real estate investment industry to have established many of the practices which are now common in real-estate crowdfunding. For example, Patch of Land was the first real estate crowdfunding platform to focus exclusively on real-estate loans as opposed to equity, or both debt and equity simultaneously.
Also, Patch of Land was the first to pre-fund the loans it offered, providing immediate accrual of interest and giving borrowers access to all borrowed funds immediately without needing to wait for investors to sign on.
Patch of Land was also one of the first to co-invest in its property loans alongside the investors on its platform, aligning their mutual interests.
In the summer of 2015, Patch of Land announced its Indentured Trustee Investment Model, offering a bankruptcy-remote investment structure and stronger consumer protections for its investors. Patch of Land opened its Indentured Trustee Model documentation to the public in the hopes that other firms would follow suit, as many did.
In May 2015, Patch of Land completed the largest ever real-estate investment loan offering of $1,900,000 to be fully crowdfunded (via regulation 506c ) as of that date.
In 2016, Entrepreneur Magazine named Patch of Land to its list of 100 Brilliant Companies
Due to current investor protections written into US FINRA and SEC Regulations - specifically rule 506 of SEC Regulation D, SEC Regulation A, and The JOBS Act - real-estate crowdfunding (such as it's offered via Patch of Land) is not yet openly or easily available to retail investors. As such, Patch of Land is only available to Investors/Lenders who are considered accredited investors by US regulatory bodies.
There are currently no regulatory restrictions on who can qualify to borrow via Patch of Land.
Funding & Investment
Patch of Land's first major outside investment came in 2014 from Smart Street Ventures, a subsidiary of Tactical Group Holdings. Thereafter, Patch of Land became the first real estate crowdfunding firm to crowdfund itself via the Seedinvest equity fund-raising platform.
Patch of Land subsequently raised a record (for real-estate crowdfunding companies at the time) $23.6 million in institutional financing led by SF Capital of New York, as well as an investment from Ron Suber, president of Prosper.com marketplace.
- Peer to Peer Lending
- Peer to Peer Banking
- Comparison of Crowdfunding Strategies
- Disruptive Innovation
- Crowdfunding (Real Estate)
- Non Bank Financial Institutions
- Hard Money Loans
- Bridge Loans (Real Estate)
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