Real Estate Finance and Funding Innovations


Jeff Bartel

Chairman and Managing Director

Real Estate Finance and the Rise of Fintech for Funding

As inflation concerns continue to trouble some investors and interest rates keep rising, it is not surprising that real estate investors are looking for alternative funding and real estate finance options. While fintech has played a role in the real estate industry for decades, today’s economic conditions have catapulted it to the forefront.

The reality is that fintech is changing how we handle real estate finance, track property ownership, and even purchase real property. These changes are generating new real estate opportunities, with fintech assisting investors with growing investment portfolios.

Crowdfunding Real Estate Investments

One major shift in real estate investments is the popularity of crowdfunding. This type of real estate finance strategy is often a win-win for developers and investors. It allows developers to bypass the traditional lending options that are usually time-consuming and limited in real estate funding opportunities and will enable investors to diversify their investment portfolios to include real estate without the hefty upfront down payment.

In many cases, crowdfunding real estate investments can provide a higher dividend than traditional real estate transactions. Most importantly, crowdfunding in the real estate market can help minimize your risk level because you do not have to use any personal assets for collateral.

While crowdfunding can provide an alternative way to invest in real estate, there are some downsides to using this strategy. First and most importantly, since there are multiple owners, you will not have direct control over the decisions regarding the property, and you typically cannot use the property as collateral for other loans. Additionally, some crowdfunding platforms that offer real estate investments only work with accredited investors. Finally, since this is a relatively new investment opportunity, it is sometimes difficult to determine which platform is best.

It is crucial to weigh the pros and cons of this investment option before deciding whether crowdfunding real estate investments are suitable for you.

Fintech innovation, including blockchain, changes the speed of transactions while decentralizing the investing process

Blockchain Transactions in Real Estate Finance

At first glance, it may seem like something other than blockchain and real estate should be partnered. However, the reality is that blockchain may help to revolutionize the real estate industry. There are several ways this is happening.

First, blockchain provides a safe and secure way of storing and managing real estate records and transactions. Second, it helps to eliminate the middleman by decentralizing the process, which is prone to fraud and errors. Finally, blockchain can speed up the transfer of ownership process and cut costs for buyers.

Those interested in investing in blockchain real estate transactions can do so in several ways, including:

Purchase Property With Cryptocurrency

The most direct way to invest in real estate through blockchain is by purchasing real estate using cryptocurrency. Since this is a new investment opportunity, investment options using this payment method are possibly limited. However, there are several platforms that investors can use to purchase property both nationally and internationally using cryptocurrency.

Buy Real Estate Tokens

You can also purchase specialized real estate tokens representing ownership of a specific property. In many cases, tokenized real estate opportunities are broken into fractions, which means that one token represents a portion of the property. You can also sell or trade these tokens through numerous platforms.

Invest in Real Estate Finance Related Cryptocurrencies

If you are not ready to purchase real estate with blockchain technologies, you can invest in buying cryptocurrencies that involve real estate finance. For example, you can invest in a cryptocurrency that is working towards creating a decentralized storage system for property transfers and ownership.

Cloud-Based Commercial Lending

Cloud-based technology is already helping simplify the real estate industry. For example, cloud-based loan origination software helps streamline the loan process for both the lender and the investor. It allows most of the lending process, if not the entire process, to complete online while creating safe, more secure document management capabilities.

This technology is such a big part of the lending process, especially for commercial real estate transactions, that it has gained the government’s attention. The Biden administration recently announced its plans to expand its SMB 7(a) program, making it more assessable to a diverse set of small business owners.

While no agreement regarding accomplishing this goal is set in stone, many in the cloud-based lending sector are hoping for good news for the industry. Because fintech lending opportunities tend to attract many minorities, as well as low-income, business owners could play a role in helping the government reach its goals. In addition, with or without the government’s approval for cloud-based commercial lending to participate in the SMB 7(a) program, this type of lending will likely continue to increase as technology advances.

When investing in fintech real estate, it is essential to do your research and understand what opportunities are available. Since this is a relatively new investment market, many fraudulent platforms often offer great rewards for your investment. This factor makes it critical to only work with fintech companies and platforms featuring a solid reputation for success.