In my podcast, I explore the many different facets of the world of high tech, from development to marketing, sales and entrepreneurship, all with the aim of gathering key insights into startups so that listeners can derive value from this knowledge sharing . So what did I discover this week?
It’s complicated to be a foreign citizen who wants to invest in US real estate. More specifically, it is basically unheard of for a foreign citizen to finance investments in US real estate. The reason the process works the way it does surely comes from the many economists, real estate experts and more who claim to help the real estate markets etc. It is interesting, however, that the US has never attempted to find a way to provide a service that meets the distinct financing needs of foreign real estate investors.
Would you believe that if you are not a US citizen, the accepted method of investing in US real estate today 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 operating on a prepayment basis, which has been the dominant guideline for the industry, Tim and the team at Lendai have developed a methodology to help foreign investors finance their US home purchases. Now having expanded to include clients in countries such as the UK, Canada and Israel, they are quickly gaining notoriety for turning US real estate upside down – an unprecedented feat.
Helping people to use their buying potential
“You have to have 30% upfront, but we can help you with the other 70%,” adds Tim, who sees Lendai as a whole new way for real estate investors and even regular people like Tim or me to diversify their portfolios with US real estate investments previously blocked by complicated financing and payment regulations. Real estate is considered to be one of the greatest assets a person can acquire, even more so if they are a US resident. With ample opportunities and one of the largest real estate markets in the world, US real estate is in many ways a real estate investor’s dream. “As a US citizen, you get very good terms on a loan or mortgage, but if you’re a foreign investor, US banks don’t look at you and you get nothing,” says Tim.
This reality is painful for many foreign investors who may be self-confident citizens and even have good credit scores and financial track records. The fact that US banks do not provide them with funding makes any move into US markets difficult and in some cases only a dream. When Boaz Leviatan, one of Lendai’s co-founders, saw an Israeli friend trying to diversify his portfolio with US real estate, the complexity and impossibility of such a task made him realize that the industry was ripe for an innovative solution to transform The Status quo. “He went to American banks and they said no to him, even though he’s a good guy, all because he didn’t have a credit rating,” says Tim, “and even in Israel, the banks had no way of valuing the property. “
Essentially, this meant Boaz’s friend had nowhere to turn when it came to finding funding. And then Lendai steps in, with the ability to provide financing for overseas real estate investors looking to buy in the United States. Talk about answering a pain point where you hurt the most. The Lendai team is now trying to work with local real estate partners to promote their solution and real estate investment tool.
Even if I can get financing, how do you know I should?
Even when innovating a clearly problematic process, teams need to assess where there is a chance things can go a little wrong. Of course, when dealing with lending mechanisms, it is imperative to assess risk and reward for each potential deal and borrower. Tim’s primary focus is trying to mitigate that risk: “That’s the data science at this business and that’s what I’m building, underwriting models that help you manage the risk associated with a specific property or client to understand.”
The technology isn’t just for anyone to get funding. After all, when developing a solution like Lendai, one of the fundamental aspects has to be trust. If you don’t trust your lender, which in this case is essentially like a bank, why would you ever work with them? This is why Tim’s algorithms are so crucial to the development of the product, especially as they expand into new markets.
As the world moves more and more toward remote processes, Lendai is clearly answering a pain point for foreign real estate investors around the world. Not only can you now actually invest in the US from abroad, but you can even do so from the comfort of your own home.