Patch of Land

About Patch of Land

From its website:

As real estate markets continue to heat up, Patch of Land can help you take advantage of opportunities to invest in single family residential and commercial properties in as little as 7 days.

Whether you’re rehabbing houses, duplexes or apartment buildings in an already flourishing neighborhood, looking to finance a stabilized rental property, or doing pioneering redevelopment in an up-and-coming area, you need funding fast in order to capitalize on both your insight and your opportunities.

…Patch of Land aims to solve the problem of slow, inefficient, fragmented and obscure private real estate lending by using the latest technology, data and process efficiency to more accurately assign risk profiles and project viability, while greatly reducing time and cost of loan underwriting for borrowers with real estate projects that are overlooked or rejected by banks and traditional lenders.

Loan Programs

Patch of Land’s primary focus is investment residential fix and flip loans and rental property loans. The firm also provides private loans secured by commercial real estate. Patch of Land’s interest rates start at 5.99% and are available for a short term of 12 to 24 months or a long term up to 30 years. The company offers financing up to 85% of your property value and will consider financing up to 100% of your renovation (rehab) budget. Patch of Land is a great option for borrowers looking for short-term affordable financing to capitalize on an opportunistic real estate transaction. Patch of Land is a nationwide private lender but does not presently lend in AZ, ID, MN, NV, SD and UT; it also does not make owner-occupied home loans.

Presently, Patch of Land has funded over $725 million spread over 1,571 loans. 75% of loans made were secured by single family residential, 15% were secured by multifamily residential and 10% by commercial real estate.

Fix & Flip Loan Program Highlights / Guidelines

A fix and flip loan is a short-term loan for a borrower looking to purchase or refinance a property that requires renovation work. Usually a fix and flip loan will enable a borrower to achieve a profit from the sale of a property for more than it cost to purchase and renovate it. Refinancing into a permanent loan and renting out the renovated property to receive an income stream, is also a common objective for a borrower seeking a fix and flip loan.

Patch of Land offers ground-up constructions loans for single family residential, 2 to 4 unit residential, condominiums and multifamily 5+ units. 12 month terms up to 70% loan-to-cost, with rates from 9.25% on loan amounts up to $5 million are available.

  • Loan sizes from $75,000 to $3+ million
  • Loans secured by single family residential, 2 to 4 unit residential, condominiums, townhouses, multifamily apartments, mixed-use buildings > 50% residential, small commercial properties
  • 600 minimum credit score required
  • Loan-to-value (LTV) up to 85%
  • Loan-to-after-renovated-value (LTARV) can’t exceed 70%
  • Up to 100% financing of the renovation budget is available
  • No occupancy requirement or minimum debt-service coverage ratio
  • Interest is only paid on funds that have been disbursed
  • 12 month loan term
  • No prepayment penalty
  • Interest rates from 7.5%
  • Close in as little as 7 days

Rental Loan Program Highlights / Guidelines

A rental loan is a short or long-term loan for a borrower looking to purchase, refinance or pull cash out of an investment rental property. This program differs from the fix and flip program because the property must be occupied and meet a minimum debt-service coverage requirement; no renovation or rehab budget will be financed by Patch of Land. This program would be a good loan option for a borrower with a time-sensitive real estate scenario (expiring purchase contract or fast cash-out is needed). A rental loan would be beneficial for a borrower needing to reestablish credit to become eligible for more bankable terms, or a borrower looking for an easier permanent mortgage process.

  • Loan sizes from $75,000 to $5 million
  • Loans secured by single family residential, 2 to 4 unit residential, condominiums, townhouses
  • 600 minimum credit score required
  • Loan-to-value up to 80%
  • A minimum debt-service coverage ratio may be required
  • 24 month loan term with extension options available
  • No prepayment penalty
  • Interest rates from 5.99%
  • 2, 5, 10 and 30 year fixed terms
  • Close in as little as 7 days

Commercial Loan Program Highlights / Guidelines

This program is for a borrower looking to purchase, refinance, renovate or pull cash out of commercial real estate. This would be a good loan option for those borrowers with a time-sensitive real estate scenario (expiring purchase contract or fast cash-out is needed), or those looking to renovate a commercial property for business purposes or to sell for a profit. A borrower in need of financing while reestablishing credit to become eligible for more bankable terms, could also consider this type of loan.

  • Loan sizes from $250,000 to $5 million
  • Loans secured by multifamily apartments, mixed-use, single-use, office, light industrial, warehouse, retail
  • 600 minimum credit score requirement
  • Loan-to-value up to 80%
  • Up to 100% financing of the renovation budget is available
  • 1.1x minimum debt-service coverage ratio
  • Interest is only paid on funds that have been disbursed
  • 12 month loan term with 1 year extension option available
  • Interest rates from 8.5%
  • Close in as little as 7 days
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The Loan Process

LendVer did not shadow the application or loan process for Patch of Land but the company outlines fairly detailed steps on its website.

Step 1: The first step is to request a Patch of Land representative contact you by inputting your contact information here. Next, a representative will reach out and direct you to complete a brief 5-minute application on the company’s secure website. Be prepared to answer questions about the transaction you are seeking financing for, along with information about your investment experience, financial background and credit history.

Step 2: After your application is completed a Patch of Land representative will contact you to review your application for completeness. Any questions about your application will be addressed along with a discussion about any eligible programs.

Step 3: If you are eligible for financing through Patch of Land based on your initial quick-application and conversation with your representative, you will be forwarded formal application documents that request more detailed information about your loan request.

Step 4: The due diligence and underwriting process will begin along with a formal review of your property, which will include an appraisal. Patch of Land states that it does not charge junk or hidden fees of any kind and has a transparent due diligence process.

Step 5: Upon satisfactory completion of your due diligence process your loan will be ready for funding. Patch of Land is a direct lender so your project can start without delay. If renovation funds were included in your loan, then these will be disbursed on an agreed upon draw schedule as you complete the required work; you will only pay interest on funds disbursed.

Here is an estimated list of required documents you can expect:

  • Credit Report (all scores, not just the middle score)
  • Proof of Funds (for down payment, closing cost, etc.)
  • Inspection Report of the Property (if available)
  • List of Comparable Sales (CMA, BPO, MLS listings)
  • Purchase Contract (if a purchase)
  • Property Management Questionnaire (rental only)
  • Construction Estimate & Time-frame (if applicable)
  • Contractor Information
  • Payoff Statement (if a refinance)
  • Borrower’s Attorney Information
  • Articles of Incorporation
  • Developer Biography (if applicable)
  • Property Description/Plans

Here is additional information about the loan process from the Patch of Land website:

We also complete an independent background check of the borrower and the corporation.

Once we review all the items, the developer is called to discuss details and answer any questions. If everything looks good, the loan is presented to our Executive team to determine the Interest Rate, Points & Structure of the loan.

It is important to note, that many factors go into the underwriting of a loan. We typically like the developer to put money into the deal (the more, the better). How “seasoned” is the developer? Are they buying under market value? What is the LTV? More importantly, what will the ARV (After Renovated Value) be? We typically look for an ARV to be around 60% of the loan. Is it in an appreciating market?

We then call the developer to present the Letter of Engagement and answer any questions they may have. Once the developer agrees to the Terms, an appraisal and legal work are ordered.

All of this usually takes about 24 hours at this point. Then the appraisal is ordered.

The appraisal will usually take 4-5 days to be completed and returned to the Underwriter for review. This is a crucial part of the underwriting process because we always use a licensed independent third appraiser to evaluate the property and give us two values: the “AS IS” value and the “SUBJECT TO” value.

This can make or break a deal or at the very least, renegotiate the loan size. The appraiser is our eyes and ears at the property and helps ensure our due diligence to protect our investors’ capital.

Once everything is signed off by the Underwriter, it is scheduled to close.

In total, a loan can close as quickly as 5 days but on average it’s about 10 business days.

Pros

  • Patch of Land offers aggressive terms compared to many of the private money lenders we reviewed. Rates start on the low end of the spectrum at 5.99%, and the 85% maximum LTV and 100% renovation funding offered are high leverage points.
  • Patch of Land closes fast, funding loans in as little as 5 days with 7 to 10 days being the norm. The firm requires minimal paperwork and is transparent about its process.
  • A variety of property types are considered from single family investment residential, all the way up to single-use commercial property. Patch of Land is a good one-stop-shop for your private money financing needs.
  • Patch of Land offers small loans sizes down to $75,000 for residential, and $250,000 for commercial. It’s difficult to find private money lenders that consider loans sizes this small as most prefer larger loans of $1+ million.
  • Patch of Land offers renovation financing for commercial property, this is also uncommon due to the many variables that surround this financing type.
  • No borrower experience is required to obtain a loan from Patch of Land, but to obtain the best possible terms 3 property projects in the last 3 years is preferred.
  • Patch of Land offers ground-up construction financing for investment residential and multifamily property up to $5 million and with rates from 9.25%.

Cons

  • 75% of Patch of Land’s loans have been secured by single family residential, this means it has a smaller appetite for multifamily and commercial property transactions.
  • Patch of Land is not the best fit for a borrower with serious credit issues. The firm prefers credit scores over 600, requires that liens and judgments over $10,000 be paid off prior to close, and it does not like to see any bankruptcies or foreclosures within the last 2 years (if you have credit issues a different private money loan may work for you).

Why Patch of Land is the Best

Patch of Land offers a fast, low documentation loan process with affordable private money rates and high leverage. The company’s process and fees are transparent and it has a dedicated team to assist you along the way. Additionally, first time flippers and private money borrowers are eligible for financing which is not possible through many other lenders. The small loan sizes Patch of Land considers along with commercial property financing, means more borrowers will be eligible for financing. Patch of Land is quickly closing in on $1 billion financed which means you are dealing with an experienced lender. Creative programs like 30-year fixed rental loans, commercial real estate renovation loans, and ground-up construction loans make Patch of Land a great option for hard to find financing.

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