KKR doubles down on house flipping loans

Private equity firm ramps up investment in Toorak

TRD New York /
May.May 14, 2018 12:30 PM

Toorak’s John Beacham

Investment giants ranging from private equity shops to banks are betting big on house-flipping loans.

Private equity firm KKR increased its investment in New Jersey-based mortgage firm Toorak Capital Partners from $75 million to $250 million. Toorak buys loans from firms like LendingHome and PeerStreet, which issue 12-month, high-yield mortgages for home fix-and-flip projects.

Meanwhile, investment bank Goldman Sachs has also started issuing loans to home flippers. Research firm Nomura estimates that the total issuance of these loans in the U.S. will grow by 25 percent to $15 billion this year, the Wall Street Journal reported.

Flip loans come with interest rates of 8 to 12 percent, which is increasingly appealing to institutional investors as long term interest rates on safer assets like Treasury bonds remain low. Investors are betting that default rates will remain low because a lack of new construction keeps a lid on supply while a growing number of millennials buying their first homes increases demand for renovated properties.

Traditionally fix-and-flip projects were financed by hard-money lenders. “The market has been local lenders, usually not banks, lending inefficiently,” Toorak’s CEO John Beacham told the Journal. That has changed with the rise of firms like LendingHome, which has raised more than $160 million in venture funding. [WSJ]Konrad Putzier


Related Articles

arrow_forward_ios
With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)

Real estate stocks push up this week as U.S.-China trade tensions ease

416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case

4650 Broadway (Credit: Google Maps)

Inwood site goes for twice what seller paid last year

WeWork co-CEOs Artie Minson and Sebastian Gunningham

WeWork under pressure as losses soar to $1.25B

195 Broadway and L&L Holding's David Levinson and Robert Lapidus (Credit: Google Maps and L&L Holding)

L&L, Safehold lock in $592M in financing for Downtown building

Tore Steen, CEO of CrowdStreet (Credit: iStock)

CrowdStreet lands $12M in financing, hires execs

A rendering of the The Epic in Dallas, Texas and Westdale CEO Joe Beard (Credit: Westdale, Wikipedia)

No panic: Westdale mulls $50M Series B bond raise in Tel Aviv

(Credit: iStock)

S&P hits another record, but real estate stocks don’t follow suit

arrow_forward_ios