Patch of Land Review 2023 – Crowd Investing in Real Estate Fix & Flips
Investors are able to view the borrower’s real estate project proposal, due diligence documents, ARV/LTV, interest rates and other pertinent information in order to determine whether or not the borrower’s project is a good fit for the investing portfolio.
However, Patch of Land has shown a bumpy track record and some issues with customer service. That's why our review is covering how this crowdfunding platform works, what the risks are, and how to decide if it's a good investment.
Patch of Land Review
Commissions & Fees - 7
Customer Service - 3
Ease of Use - 7
Diversification - 6
Performance - 4
Due Diligence - 7
Patch of Land offers pre-funded real estate deals with a low required minimum. The company also applies a thorough due diligence process in vetting every deal. However, you must be an accredited investor, and the service's high fees could eat into your profits.
Pros & Cons
Is Patch of Land a Good Investment?
Despite its recent rebrand to Patch Lending, investing with this real estate crowdfunding company is still a risky investment. Many Investor Junkie readers report high default rates on properties and a lack of transparency and updates from PoL regarding these loans.
Furthermore, it seems difficult or nearly impossible to get your money back or out of the platform if properties go into foreclosure.
I called Patch of Land to ask about available investment opportunities and to learn more about the platform. I was promptly placed on hold to be redirected to another line and never ended up being connected.
Patch of Land Features
|Account Fees||0-3% of loan amount|
|Time Commitment||1 Months|
|Offering Types||Debt, Equity, Preferred Equity, Direct Ownership|
|Property Types||Commerical, Residential, Single Family, Foreign Investors|
|Regions Served||46 States; excluding MN, SD, NV and AZ|
Short-Term Debt Investments — PoL funds only short-term debt investments, which can be considered safer than equity positions in real estate because they're in the first position of repayment, should a property lose its value. Most projects are short-term transactional real estate debt for rehab, refinancing and bridge loans.
Pre-funded Loans — PoL pre-funds all deals. The borrower gets funds at closing and can get started with the project immediately. Investors start earning interest the day they invest.
IRA Accessibility — If you have a self-directed IRA, you can invest in Patch of Land deals. At this time, you cannot invest with IRA funds held with a regular broker.
Terms — Most deals are 12-month residential loans. Some commercial loans are for 18 months, and PoL is rolling out a mid-term loan product that has a 36-month duration.
Fees — There is no annual fee for investors or borrowers. PoL takes between 1% and 2% of the interest distributions made by borrowers. PoL does not charge transaction fees or campaign success fees like many crowdfunding platforms do. They work much more like a regular loan marketplace and charge fees for property appraisal, closing costs and origination points that are already factored into each deal listed on the platform.
Access for Non-U.S. Citizens — Most P2RE sites exclude non-U.S. citizens, but PoL is happy to allow investors from around the world as long as they have a U.S. bank account and are accredited by the definition of their country of origin.
Due Diligence and Underwriting Process — PoL implements traditional underwriting procedures, including arm's-length third-party appraisals that include a full walkthrough and value analysis, pulling comparable data and metrics to evaluate the local market, the performance of that particular asset class in that market, and the risk profile of the borrower.
AutoInvest (New) — PoL's new AutoInvest feature automatically enters participants into new investment opportunities that meet their pre-selected criteria for as little as $1,000.
What Is Patch of Land?Launched in 2013 and headquartered in Los Angeles (with a satellite office in New York City), Patch of Land uses technology and data to provide transparent and low-minimum real estate investing opportunities in both residential and commercial projects.
The company was started by two brothers, Jason Fritton, an e-commerce entrepreneur, and Brian Fritton, a software engineer, and system architect. In April 2016, the company brought on Paul Deitch from Oaktree Capital Management as chief executive officer. Deitch has over 25 years of financial services experience, including risk management, product development, finance, and compliance.
Stats as of July 2017 show that Patch of Land has funded 655 loans, delivering an average rate of return of 11.12% since inception. PoL is a BBB accredited business with an A+ rating.
However, as you'll find in our review, many investors report problems with this real estate crowdfunding platform like high default rates and poor customer service.
How Does Patch of Land Work?
Patch of Land uses traditional underwriting procedures, including arms-length third-party appraisals with a full walkthrough, an evaluation of the local market, the performance of that particular asset class in that market, and the risk profile of the borrower. PoL works with experienced developers and limits funding to manage risk. The guidelines for investment deals are:
- Minimum loan amount of $100,000
- An LTV (loan to value) up to 80%
- An ARV (after-rehab value) up to 70%
- Loan duration between one and 36 months
- No prepayment penalties
While each property and project varies, Patch of Land’s investments start to accrue interest immediately, which is paid back to investors monthly or quarterly, with a balloon payment of remaining principal and interest at loan maturity.
Most real estate crowdfunding platforms will host a project and wait for it to become fully funded before moving forward with the developer’s rehab work. This is a disadvantage because investors who’ve contributed funds to these potential projects are left waiting for the project to be fully funded while their money sits dormant in a nonperforming investment.
Patch of Land’s business model is to pre-fund all projects before offering them to investors. They go to the closing table with the funds to make the deal happen. They’re so confident in their underwriting criteria and process that they invest 100% in the projects they approve — and get the borrower the funds and approval to move forward that day.
Pricing & Fees
Patch of Land doesn't charge annual fees for investors or borrowers. To make money, it takes 1% to 2% of interest distributions from borrowers.
Patch of Land is different from many crowdfunding companies that focus on equity-based investments. But despite this different approach, its recent track record and poor customer service is concerning. For this reason, we suggest considering several Patch of Land alternatives that still let you add real estate to your portfolio.
|Account Fees||1%/year||0-3% of loan amount||1-1.25%/year asset management fee|
We like Fundrise since it lets you invest in real estate starting with only $10. It also has a variety of funds to help with diversification, and you get paid quarterly dividends. As for fees, Fundrise only charges 1% annually. Overall, it's our favorite way to invest in real estate with little money.
As for RealtyMogul, it's an excellent option for investing in commercial real estate and private deals. And it's open to non-accredited investors as well and has a $5,000 minimum investment amount.
These days, investing in real estate is easier than ever thanks to the rise of crowdfunding platforms. And companies like Patch of Land provide a more niche is focuses on first-position debt loans only (no equity deals) and pre-funding all deals.
However, despite taking a different approach than equity-based real estate crowdfunding companies, there are significant risks to investing with Patch of Land. Recent reviews of the company are largely negative, citing high default rates, a lack of reporting, and poor customer service.
For these reasons, we suggest exploring alternatives like Fundrise or even newer crowdfunding companies like Arrived Homes. The short-term nature of PoL's debt investing options is appealing. But until the company proves its rebrand has led to better performance and customer service, proceed with caution.
100% Principal Loss….CRAZY….Looked at my Patch of Land account out of the blue today and noticed a 100% principal loss on one of my foreclosed investments posted on 4/14/2022. The original property appraisal was $390,000 on a nine unit apartment building offered to POL investors at 60% “as is” LTV. In contacting POL, their representative stated the property eventually sold for $63,000 in April 2021 at a 100% loss to investors after POL deducted their expenses to foreclose and resell property. To add insult to injury, POL’s rep stated POL mistakenly failed to post the “100% loss” to it’s POL investors back in 2021. Being actively involved in real estate lending for 30 years I’ve never experienced a 100% loss on a RE loan investment, let alone waiting a year for a transaction to post. Reading all the negative reviews posted here by POL investors, one must ask how Investorjunkie.com, or Ruth Lyons, who authored the positive analysis, can continue to promote Patch of Land. If you have an opinion on this I encourage you to post a reply.
Thanks for sharing, Jeff, and I’m really sorry to hear about the loss on your Patch of Land investment. We just updated the review this week and added a warning at the top based on the negative experience that you and others have shared. We really appreciate it when our community gives us firsthand info like this to help us better protect our readers!
Trust me, you do not want to invest in any POL deals.
I have two left that have been in default for years and it is clearly not a priority for POL to work these out.
I’m waiting for the site to just not load one day.
I’m in the exact same position with 2 remaining investments. They refuse to respond to inquiries about these. It would be nice if they would at least give excuses.
They are the worst. Everything people are saying is true. They will not respond to inquiries and have not returned funds for projects that have been sold. TOTAL SCAM
I’ve invested in POL (along with many other online platforms) after 2 years of experience. Patch Of Land is THE WORST, because:
1. Does not provide any loan update, payment, default , foreclosure etc
2. To lookup the information on loan performance in your own online portfolio is nearly impossible by the “shady way” things are shown
3. No one bothers to answer even if you have 200k invested in the platform
I generally do NOT write reviews, but I really want to do good by warning other potential investors to NOT invest with Patch of Land. My experience with Patch of Land is a particularly bad one.
Of the 10 loans I have invested with Patch of Land, 6 have been in default for more than 4 years. When I called them, they assured me that there would be no loss of principal as their “contracts are iron-tight.”
All was going well as I was promised no or minimal principal loss until recently I was issued a “Non Performing Loan Reconciliation” where I lost over 60% of my principal with no interests earned for 5 years.
I’m typically not an emotional person, but I was extremely depressed and infuriated when I saw this. When they sold off my loan to a 3rd party, they sold it for 70 cent on a dollar. However, they made sure that THEIR portion of the fund invested got paid off in full (meaning they suffered no principal lost). To add salt to injury, they made a killing orchestrating the sale of the non-performing loan they did a such a poor job underwriting in the first place.
If any other investors have suffered big losses as I have, I am interested in filing a class-action lawsuit against Patch of Land.
I’m with you! I received a call from their “liqudation” director yesterday. Basically saying they wanted to abuyou my open loans. twouldn’t pay more than 10 cents on the dollar. They have already found a buyer for a part of the business that doesn’t want the crowd sharing loans. I asked what POL was doing to sell the REO loans since we are in such a hot RE market. Question ignored.
To add insult to injury, he was in his car with his children and lacked any information on my account. Very professional!
This was a horrible mistake investing in Patch of Land. As of now I am down over $10,000 and probably will be adding at least another $12,000 after this nightmare is over with. Foreclosure after foreclosure this is a bad group of investments. I had Investment in PeerStreet and did not lose a penny. If you want to sleep at night do not invest in Patch of Land.
Now the are selling the Notes to discount “warehouse” mortgage companies that take on bad loans.
I regret investing with them. Over a year with no payments made by the borrower. P of L lists the status as foreclosure but yet they have filed nothing. There are only automated responses to my complaints
Do not invest with Patch of Land! I’ve invested in 24 projects with them and 9 are delinquent or in foreclosure. This performance is extremely bad compared to other platforms and I have $80,000 tied up with Patch of Land with no assurance that it will get returned and no response to my emails to customer support. My account still shows a 9.3% blended interest rate but this is a lie… the return is MUCH lower than they are reporting to me, since my money has been held for several years with zero returns.
Patch of Land is the worst investment I have made since 40 years of investing. In my opinion, for the well over $100k I invested their transparency and ability to vet borrows is terrible. Stay away!
I have had about a 25% default rate. I have investments that have been defaulted almost 3 years and haven’t received any of my money back. The thing is–this is not unique to Patch of Land. Real estate crowdfunding is lending to the bottom feeders, and some of them don’t intend to pay back. These bottom feeders know all the tricks in the book to avoid paying back, delay, force the lender to foreclose, then declare bankruptcy. That’s why you’ll wait years to get your money back, and when you get any back, you may only get a portion. My advice: don’t do crowdfunding!
I am a real estate attorney, CPA and licensed R/E broker. I’ve invested in 2 deals since my son started working at POL in a senior sales position (he recently left the company). One deal performed as promised, but the other has been abysmal. As soon as difficulties started to arise, communication has been quite difficult…phone calls were not returned and I’ve been referred to 3 or 4 people who were supposed to be contacts for info. After recently complaining that the “monthly” reports were not informative, I was told by Jason Fritton that reports are being being “standardized” because no matter how much detail is given, some investors complain that it is not enough. The current report offers no timely information. I am considering talking to an attorney about the best way to proceed.
I have 43 loans with POLand, however recently stopped investing due to reporting concerns as I’m under the impression they are attempting to conceal default and foreclosure information. While the information is there, one has to really dig to find it. Patch of Land states that basic reporting features are a challenge for their operational department. Given the information that POL should be providing is elementary loan reporting, I reached out to Matt Levine, VP of Operations. I’ve yet to receive a call after multiple followup attempts. My experience is POL’s customer service seems to disappear once issues are brought to light. (Note: I’m invested in multiple CFRE sites).
POS is a second rate platform NOTHING MORE. I made 2 investments- one of which is currently in foreclosure and hasnt paid a distribution in 11mos. The other was in default and recently paid off principal but did not bother paying the 5 mos back dated distributions that were owed. Stay away- there are dozens of better crowdfunding platforms out there.
This “lender” took me on a 6 week circus where I applied for the loan that they steered me toward, gave me an estimated close date, that date came and went, (keep in mind I did everything correctly and on time on my end), they didn’t respond to emails from me for weeks, then after 6 weeks they told me to reapply for a different loan. What a joke this business is. Wouldn’t surprise me to find them featured on CNBC’s ‘American Greed’ someday.
Patch of Land for me and many others, 33% uncured ‘default rate’. This rate is unacceptable and should result in these noncompetitive dropouts closing down and I hope also criminal fraud indictments. Fk you Jason Fritton. They are laughing all the way to the bank so far!
beware! Last year I invest in 10k in a debt deal just to try the Patch of Land out. 6 months later , the loan default and never got another payment since then. Now just hoping that i will get my principal back. I’m very dissatisfied and will never invest with them again!
I have had 2 loan issues with patch of land. I have had 1 loan where interest has not been paid from Feb 2017 and capital has been locked up.
Another loan also has interest and capital locked up since the property is in refinance for over 2 months.
Extremely dissatisfied with patch if lands customer support. No clarity or transparency.
Beware of investing on patch of land.
Patch of Land is not that great compared to the other platforms to be honest. The borrower qualification is written in marketing speak vs credit scores. It has a very very high default rate (as mentioned in the con section) and the customer service is really poor. They don’t even handle the defaults properly compared to the other platforms. (See Tajas’ review). Expect your money to be stuck for years when it defaults.
Note: Taking .5% from the Interest rate is commonly referred to as a 0.5% or a 50 bps (basis points) fee. Yes, technically 0.5% away from what would otherwise have been an 11% loan to make a net loan of 10.5% APR is a 4.5% reduction but this is simply not how Interest Rates are referred to in the industry vernacular.
My understanding is that many of the other RECF firms – especially the newer ones – take a 1 – 4% fee so a 0.5% or a 50 bps fee is actually very reasonable, FYI.
I’ve been an investor on Patch of Land for well over 1 year and have invested in approx 12 loans over that time. I’ve also tried others (RS, iF, PS, etc..) and my opinion is that Patch of Land offers the best value.
Their legal structure is the most ‘bankruptcy remote’ as they put it and thus most protective of my funds. They begin paying interest immediately after I invest, and I like they they also invest in the deals along side me too.
I don’t understand those below who are complaining about Defaults – This is the biggest advantage to investing in RECF platforms : The fact that – even in the event of default – your funds are not lost. In fact, you often end up earning way more $$$, at higher interest rates, as I did on 2 of my defaulted investments. (It just takes a little longer)
In short, if you’re not comfortable with some degree of defaults, you should NOT be investing in RECF but rather only in T-Bills.
But if you are willing to assume the inherent risks, as well as enjoy the upside, and like working with an honest, transparent company that works diligently for its customers (in my experience) and has a user-friendly website, Patch of Land is as good as they come, IMHO.
This is absolutely not true. I had 3 defaults with POL over 15 loans! All in NJ. I expect to only recover about 30% of my principal as the properties are listed on the MLS for substantially less than the POL loan amount. I invest on RS and RM… POL is the only platform I’ve lost principal with.
How long does it take to get the money back in case of defaulted loan?
Been investing on multiple different Cloud Funding platforms for couple of years now. Patch of Land has impressed the way they advertise. However, their default rates is the highest out of all the platforms we have invested. 4 out of 9 different deals we have invested are in default. Also, they consistently make mistakes on the monthly payments, we have issues open for almost 6 months now where they have not resolved missed payment issues. Some of other investors friends have gotten extra payments.
Cross your fingers if you decide to invest with them. Good luck!!!
Similar views. I have invested with FundRise/RealtyShares/Patch of Land platforms. All are doing fine except Patch of Land. Their default rate is quite high. Also their stats do not reflect any of this(when I checked last).
It is a constant nagging problem with Patch Of Land when it comes to dispatching payments. Monthly payments supposed to be credited my account on 15th of every month but it does not show up until 19th usually, other times like this month on 21st there is still nothing. I have opened multiple Zendesk tickets their IR person told me they have problem with their bank. They are just worse.
Horrible communication, if there is ever an issue or question they are impossible to reach. Payments irregular, communication incomplete and sporadic. Received an email saying they had overpaid me and were withholding future proceeds. there was never an explanation of what investment they were referencing or what occurred. All I know if money that was supposed to be dispersed into my account wasn’t . WOULD AVOID!!