Wall Street’s Venture into Real Estate: What Does It Mean for You?

The home rental market is forever changing. Like any industry, this particular area of interest inside the world of real estate has its high and low points. 

With the business of flipping properties growing into such a lucrative endeavor, more and more blue collar professionals are joining the trade. Wall Street has noticed the rise in property flippers investing their energy in rental properties and have decided to insert themselves into the game plan via the most important part of the process and their most knowledgeable climate; finance. This creates a positive effect on both financial investors and the property flippers themselves.

Flipping is a numbers game. Big money is dropped on purchasing properties for a moderate return. The idea is to keep flipping. Usually enough capital is built to move on to the next property by buying in cash. The problem is that all cash sales are on the decline. Multiple projects can be done yielding massive gain if a flipper has the capital to back it up. This is difficult when your next flip is dependent on the profit from your last. In this instance, it is better to look for an investor. The standard bank loan can be difficult to obtain and have too many stipulations attached. Wall Street has jumped in to simplify the process and offer an alternative to all cash buys and traditional bank loan.

The question arises as to who benefits the most from this new wave of lending. Most investors are still using traditional sources of finance to fund these business deals, including the all-powerful cash purchase. For self-run flippers, these five to 10 year loans give a half of a million dollar piece of mind. Large investment companies can depend on loan ranges all the way up to 100 million. Without the stipulations of property condition weighing down the investor, these Wall Street nonbank commercial loans are the ideal selection.

Wall Street is now backing several nationwide companies that specifically lend to investors of single-family rental properties. With nearly 15 million investment properties owned throughout the nation, the demand for financing is high; the demands for reasonable and accessible lines of credit are an even higher demand. For this reason, several lenders have planted themselves into the business of single-family rental properties by being backed by Wall Street as opposed to tradition banks.

The void has been filled in the investment property world whereas other sources were just not realistic. Skyscrapers and towered buildings that range in the hundred million dollar range are rarely able to be funded using cash or hard loans. This new wave of commercial lending is more flexible and walks around with pretty big wallets.

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