The dangers of crowdfunding your house flip
Crowdfunders are a new player in the lending scene right now. Crowdfunding is completely different than hard money and private lenders because you’re not dealing with a single lender. Instead, you are dealing with a consortium of investors who are funding your loan.
There is anecdotal data that crowdfunded loans have a higher default rate than private money loans. Here at Rehab Financial, it’s our opinion that this is because when a borrower gets into trouble with a crowdfunded loan, there is no single person to resolve the problem, restructure the loan, change the allocation of rehab funds, etc.
Usually, crowdfunders are less sophisticated investors in the rehab space. While they may have money to invest in your project, they may not necessarily understand how rehab loans work, the challenges rehab projects face, and the methodologies that groups like Rehab Financial have developed over years of being in the lending business.