In my podcast, I explore the many different facets of the world of high tech from development to marketing, to sales, to entrepreneurship, all with the goal of collecting key insights on startups for listeners to gain value from this knowledge-sharing. So, what did I discover this week?
Being a foreign citizen looking to invest in U.S. real estate is complicated. More specifically, it is basically unheard of to get financing for investments in U.S. real estate as a foreign citizen. The reason why the process works like this, I am sure, comes from the many economists, real estate experts, and more claiming they are helping real estate markets, etc. However, it is interesting that the U.S. has never tried to find a way to provide a service that answers the clear need foreign real estate investors have for financing.
Would you believe that the accepted method for investing in U.S. real estate today, if you are not a U.S. citizen, can require a full cash payment?
Tim Mironov, Chief Data Scientist, and co-Founder of Lendai, preaches a new way of financing real estate for foreign citizens. Rather than working on the ‘cash up front’ basis that has been the ruling guideline for the industry until now, Tim and the team at Lendai have developed a methodology for helping foreign investors finance their U.S. real estate purchases. Having now expanded to clients in places like the UK, Canada, and Israel, they are quickly gaining notoriety as having flipped U.S. real estate on its head - an unprecedented feat.
Helping People Leverage Their Buying Potential
“You have to have 30% upfront but the rest of it, the 70% we can help you,” adds Tim who sees Lendai as providing a whole new avenue for real estate investors and even regular folks, like Tim or I, to diversify their portfolios with U.S.-based real estate investments, previously blocked by complicated financing and payment regulations. Real estate is considered to be one of the greatest investment assets that a person can acquire, even more so when it is based in the USA. With opportunities abound and one of the world's biggest housing markets, U.S. real estate is in many ways the dream for many real estate investors. “As a U.S. citizen you will get very good terms for a loan or mortgage, but if you are a foreign investor, U.S. banks will not look at you and you will get nothing,” Tim highlights.
This reality is painful for many foreign investors who may be stand-up citizens and have even good credit scores and financial track records. The fact that U.S. banks will not provide them financing options makes any sort of move into U.S. markets difficult and, in some cases, just a dream. When Boaz Leviatan, one of the Lendai co-founders, saw an Israeli friend of his try to diversify his portfolio with U.S. real estate, the complexity and impossibility of such a task made him realize that the industry was ripe for an innovative solution to change the status quo. “He went to American banks, and they said no to him, even though he is a good guy, all because he had no credit score,” Tim says, “and even back in Israel, the banks had no way of assessing the property.”
Essentially, this meant that Boaz’s friend had nowhere to turn when it came to finding financing. And, then enters Lendai, with the ability to provide financing for real estate investors abroad, looking to buy in the U.S. Talk about answering a pain point where it hurts you the most, the team at Lendai now tries to work with local real estate partners to promote their solution and property investment tool.
Even If I Can Get Financing, How Do You Know I Should?
Even while innovating on a clearly problematic process, teams must look at where there is potential for things to go a bit awry. Of course, in dealing with loan mechanisms, it is essential to assess risk and reward for any potential deal and loan recipient. Tim’s main focus is on trying to mitigate this risk, “This is the data science in this company, and this is what I’m building, underwriting models that help you get a grasp on the risk associated with a particular property or customer.”
The technology is not meant just for anyone to get financing. After all, when creating a solution such as Lendai one of the fundamental aspects of it has to be trust. If you do not trust your lender, which in essence is like a bank in this case, then why would you ever work with them? That is why Tim’s algorithms are so critical in developing the product, especially as they expand into new markets.
With the world moving ever more towards remote processes, Lendai clearly answers a pain point for foreign real estate investors the world over. Not only can you actually now invest from abroad in the U.S., but you can even do it from the comfort of your own home.