Flippers, Landlords Find New Home-Loan Money

By Mary Shanklin
Orlando Sentinel.

Orlando landlord Brian Lunsford needed $40,000 to renovate a house that a college student almost burned down, so he turned to an online crowdfunding site.

Within two days, more than a dozen investors had each agreed to loan him an average of $2,800 for up to 13 months.

“He left a candle burning and it did significant damage to the interior,” Lunsford said. “I’m fighting it out with the insurance company, and I was going to front the money myself, but it was $40,000 to renovate. … that’s not easily financeable.”

Crowdfunding is just one new financing option that has emerged in a metro area where 56 percent of all home sales were paid for with cash in May, according to RealtyTrac.

Recognizing that community banks and institutional lenders are reluctant to loan money to house flippers and landlords, several companies have started offering cash to real estate entrepreneurs in the Orlando area.

But the borrowed money doesn’t come cheap.

Lima One Capital LLC, which offers loans to residential real estate investors and homebuilders, opened an Orlando office this month.

Launched in 2010 in Atlanta, the company offers short-term, fast-approval loans with interest rates of 12 percent to 13 percent to residential real estate investors and homebuilders — about three times higher than normal mortgage rates.

Last year, the company loaned $485 million in 12 states.

“Orlando has very depressed home prices that are 33 percent behind peak-level pricing, and it lags behind the rest of the nation,” said Lima One founder John Warren, a former Marines infantryman. “And that means there is going to be a lot of investors because they think the growth is going to be there.”

In Lunsford’s case, the individuals who loaned the money will earn 9 percent interest. Lunsford has agreed to pay 11 percent interest on the short-term renovation loan, and the crowdfunding platform he used, RealtyShares.com, will keep the 2 percent difference for doing the marketing.

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