While conventional loan financing is still the preferred method for most buyers, there are now numerous alternatives for consumers looking to get into real estate or for property owners looking to increase their tax revenue. These new alternatives are referred to as “non-traditional” loan financings.
Newly available options include collateralized debt obligation (CDO) loans, structured finance loans, put/call option swaps, and private equity investments in real estate. Each of these types of financing has unique benefits and challenges, making it a unique candidate for your property.
This article will discuss some of the more common non-traditional financings and how they can be applied to any type of property.
Equity crowdfunding
New funding options for equity funded projects has emerged in recent years. Most of these new funds are offered through equity crowdfunding sites such as Kickstarter or GoFundMe, but you can also purchase them through brokerages such as FinneSource.
Mostly new fund owners have previously financed their projects through equity funding, but now they have the option to issue their own shares instead. These new owners can use the money raised from investors as they wish, with very few rules and restrictions for use.
Because these new owners have previous experience with issuing shares, it is easy to determine if they will let you invest in your project.
Utility token financing
Newly developed real estate projects are utilizing utility token financing techniques to help them stay solvent while launching or expanding their businesses. This is a more affordable way to finance a project than traditional financing, and it allows early investors access to the property at an early stage.
This type of financing is typically offered in larger, highly visible projects that have already generated significant interest and capital. It is very rare to see it applied to small, hard-to-finish properties.
utility token financing does have some legal protections for the property and investors, which makes it more reliable than typical debtfunded startups. However, these protections are not always met with perfect governance or corporate practices.
If you are a tough-to- Finance property looking for an innovative financier that will take care of you through the phase of launch or expansion, look into this article for more information on5 Innovative Real Estate Financing Options for Difficult-to-Finance Properties.
Debt tokenizing
A new development of technology is called a debt tokenizer. This platform uses a debt token to represent credit worthiness. It works like this: If you need money off of me, I will still have to pay you back in full with or without my permission.
The credit card companies handle the process of creating the debt token and giving out the token. The real estate professional can then use it to represent a property’s credit worthiness in a mortgage loan.
This is very important because it can help determine if a property is able to get a traditional loan, as well as whether or not it will be able to receive a debt token.
Real estate currency hedging
Real estate markets have many buyers who can afford the properties they want, but who may not have easy access to funds. This can be a difficult situation to say no to!
Some options for real estate investors looking to hedge their property values are real estate currency trading strategies. These strategies take advantage of price changes in foreign currencies against the U.S. dollar.
As the economy improves and prices rise, buyers will likely flock to buy into this trend. Another option is buying a property that you plan on selling later, as interest rates will likely drop due to increased sales and profit-making.
