Small Loans, Big Tech

Last year, we published a two-part deep dive into the emerging world of small multifamily investing. With technology simplifying sourcing, underwriting and management in a sector that has historically been less competitive than institutional-scale investment, operators like Groma, Veritas, and Constellation Homes saw an opportunity to roll up portfolios of small (2-50 unit) multifamily buildings.

While equity has warmed to the small multifamily strategy, owners and operators of small buildings now face a new challenge: lining up debt. Higher rates and skittish regional banks have complicated the debt problem, turning an annoyance into an existential issue.

Today’s letter tackles the small multifamily debt problem and profiles several entrepreneurs looking to solve it, leveraging new technology and automation to scalably originate and service real estate loans under $50 million. Specifically, we’ll cover:

• A brief history of multifamily lending and the origins of the problem;
• Lenders introducing new multifamily debt products, including Ease and Roc Capital;
• Technology’s role in making this all work;
• Where the market might head from here.