Improve Communities, One Investment at A Time
Asset based loans.
Fix and flip loans.
Short term buy-to-rent loans.
Real estate backed loans.
Private money loans.
Hard money loans.
I call them “Community Improvement Loans.”
This asset class has been called a lot of things. Most of the names aren’t that flattering and some are even somewhat disparaging. But I like to think of these assets as “Community Improvement Loans.”
If you think about what these loans accomplish, that name makes a lot of sense. The borrowers are typically real estate entrepreneurs who find the worst properties in a neighborhood and turn them into some of the nicer properties in a short period of time. These entrepreneurs typically focus on familiar areas, hire local people to complete the work, buy supplies from nearby businesses and, ultimately, improve the neighborhood, one house at a time. When that’s repeated several times, it can lift up entire communities.
Real Estate Entrepreneurship and The American Dream
I saw first hand when I went to visit Christian Fuentes in Pomona, California (he’s a borrower through Golden Capital) how this process can lift up a community. Mr. Fuentes has made community improvement his mission. As he points out, there isn’t a government program inserting itself to better these homes. He’s just one of thousands of business people trying to make a difference locally, which at scale, has a national impact.
“Reality TV” doesn’t do this space any favors. Sure, community lending like this is not purely altruistic. These entrepreneurs are trying to make a living and want to turn a profit. But the ones who do it responsibly, and have the right experience, contribute to the U.S. housing market in a way that can benefit everyone involved.
To me, this is capitalism at its best and it fuels the fundamental ethos of the American Dream. Whether you are a buyer or a renter, you want a decent place to live with your family. You also want your neighborhood to improve, not decay. Some people call this gentrification. And by definition, I guess it is: (gen·tri·fi·ca·tion: noun) the process of renovating and improving a house or district so that it conforms to middle-class taste. But it certainly beats the opposite.
Investing With A Purpose
Nationwide, the U.S. housing stock is as old as it has ever been.* The average American home is about 40 years old.** New construction has been primarily focused on suburbs, but due to availability of jobs, bustling city life and more entertainment attractions, many young people are opting to leave the white picket fences behind and move to urban centers. Upcycling houses helps remove urban blight and is much better for the environment than taking over open spaces for housing projects.
Investors in this asset class should feel good about what they are investing in. When done right, just about everything about these loans is positive. The loans remind me of Kiva loans, but focused on improving the United States, house by house, neighborhood by neighborhood, community by community. If you want to invest in American entrepreneurs, small businesses, and a brighter future for communities throughout the country, this is how.
Join PeerStreet’s Mission
PeerStreet now works with lenders in 28 states, and that number keeps growing. We’ve funded nearly 700 loans, which helps circulate more capital to real estate entrepreneurs so they can continue doing the important work they do.
I made the case for “Community Improvement Loans” on Cheddar TV earlier this month, take a look below. If you are a lender and want to partner with PeerStreet, sign up here. To understand how we evaluate our lenders, read our blog. As always, we are here to answer your questions at email@example.com.
*Eye On Housing: The Aging Housing Stock, Governing.com: The Implications of Older Housing Stock for Cities, Zillow.com: This Old House: The Age of the U.S. Housing Stock, by Decade
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