Goldman Sachs getting into the fix and flip loan game

2 Replies

Thought this was pretty interesting. Goldman Sachs is buying a hard money lender called Genesis Capital. 

It seems hard money has mostly been a number of smaller independent 'mom and pop' lenders but now it seems the big banks are getting in on the action.

Reminds me a bit of how the big hedge funds started getting into the single family rental business during the crash , buying foreclosures and renting them out to homeowners. A game that was mostly mom and pop. 

Do you see Goldman Sachs getting a much larger piece of the hard money lending business and making it harder for small companies to compete?

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House flipping is on the rise as the residential market continues to recover from the subprime mortgage crisis. Last year, borrowers took out $40 billion in fix-and-flip loans, the most since 2006.

“A lot more new home flippers are coming out of the woodwork,” Alex Sifakis of JWB Real Estate Capital told the Journal. They “have seen the (TV) shows.”

Big institutions are taking note. Wells Fargo and JPMorgan Chase both extended credit lines to fix-and-flip lenders. And last year, the Japanese investment bank Nomura securitized $126 million in loans issued by California-based

https://therealdeal.com/2017/10/13/goldman-sachs-i...

@Joseph M. We could break up lending into different tiers of lets say

>100k

100-500k

500k-1Mil

1mil plus

Now since the market that I invest in has a median home price of around 100k I can intelligently speak to the financial circumstances of that market. In the sub 100k lending market with ARVs around 150k the margins are so slim and loans so small for a big player like GS to even do loans that small. In that space it is mainly a few players in that market doing all the paper loans for the last 15 years. Once in a while a flipper with no experience will go to one of these online lenders to get a loan but that is because the experienced local lenders will not lend to you without experience or collateral. 

Now where the local lenders start to get hurt I would assume is in higher priced markets 500k plus that is where the margin is for the Hedge Funds to be interested. But in the end if i were to borrow I will go with speed and less hassle that a local lender will give me a yes/no over a 5 min meeting for coffee over the lengthly process of getting a deal funded online but that is just my preference. 

Not surprising.

Large PE firms are already ‘flipping” although they like to call it ‘when we see an asset that only needs a small equity injection of 20 thousand or less that we can sell for a high profit then we do it.’

‘So you’re flipping?’

‘No. When we see an asset...’

Real convo I’ve had.

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