The Real Deal New York

Private equity giants giving bridge loans to home flippers

Small-time business is one of the last fragmented lending sectors
May 08, 2015 10:00AM

Wall Street is deepening its investment in the housing sector, with an increasing number of major institutional investors now providing bridge loans to small-scale home flippers.

Colony Capital, Cerberus Capital and Blackstone Group are among the firms that have started making the loans to investors who buy homes and quickly sell them for a profit, a practice that is benefiting from rising prices, a shortage of inventory and limited new construction, according to Bloomberg News.

“It’s one of the few highly fragmented businesses left,” said Beth O’Brien, CEO of Colony’s lending business. “If someone can do it nationally at scale, it’s cheaper and better for the borrower.”

Bridge loans, which are backed by the real estate, give investors cash for home purchases and renovations with about a year to repay.

Blackstone plans to make $1 billion of these types of loans per year. [Bloomberg News] — Tess Hofmann