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Saving For a Space Ship

House-Flippers Turn To Crowd Funding For Quick $£ - What Could Go Wrong?

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House-Flippers Turn to the Crowd for Quick Cash. What Could Go Wrong?

http://www.bloomberg.com/news/articles/2016-09-21/it-took-only-12-hours-to-crowdfund-1-million-for-house-flipping

US based article, but relevant to Uk imo, due to crowd funding having global reach. It could be here next, if it isn't already :rolleyes:

House flippers and property developers are increasingly crowdfunding -- tapping the virtual wallets of anonymous internet backers on platforms such as RealtyShares, LendingHome, PeerStreet and Patch of Land. For riskier ventures, such as building new homes and buying, renovating and selling existing ones, they’re finding quick financing can be easier to get online than from banks. That’s contributed to an increase in home flipping. In the second quarter, 39,775 investors bought and sold at least one house, the most since 2007, according to ATTOM Data Solutions.

Marketplace Lenders

The crowdfunding sites are part of the multibillion-dollar ecosystem of marketplace lenders, like LendingClub Corp. and Prosper Marketplace Inc., that match users who need money with people who want to provide it for anything from debt consolidation to elective medical procedures.

That business hasn’t always run smoothly. LendingClub is going through a rough stretch after years of rapid growth. In May, its founder and chief executive officer resigned amid an internal probe into a botched loan sale, sending LendingClub’s shares tumbling.

So far, there have been few defaults in real estate crowdfunding deals. When they happen, the platforms say they’ll pay investors the proceeds from property sales.

The business has other potential pitfalls. When it comes to real estate, faster isn’t always better. Wall Street’s home-mortgage machine of the mid-2000s valued speed over accuracy, with disastrous results, though most crowdfunding sites cater to investors and not homebuyers. Also, clicking for capital can be exploited by fraudsters..

..The ease of fundraising through these nontraditional lenders could be a warning sign, according to Erik Gordon, a law professor at the University of Michigan in Ann Arbor.

....“Whenever you see a big difference between the terms on which you can raise money in one market versus another market, something is wrong in at least one of those markets,” Gordon said.

“It usually is the market with the least-experienced players, and they usually end up wishing they hadn’t played.”

Edited by Saving For a Space Ship

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My initial reaction to this, after spitting out my tea, is go for it. They will be more fuel for the firestorm when it arrives. We are now in the zone where the shoeshine boy is giving you pwoperdee tips.

No bailout, no protection, just be ready to burn....

no wonder I've been warned to keep my blood pressure in check

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