Agents who work with investors who flip houses to turn a profit may be able to point them in a new direction for financing: Goldman Sachs.
The Wall Street firm is seeking new ways to make money and lending has taken an increasingly higher profile at Goldman. According to the report, the bank started out last year with small loans up to $30,000 for regular people with good credit through an online business it calls Marcus. Earlier this year, it opened its doors to investors by giving financial advisors a way to arrange loans of up to $25 million for clients backed by their investment portfolios.
Goldman Sachs has stepped up its game with the purchase of Genesis Capital, a lender to investors that buy, fix and flip single-family properties.
Pushing more deeply into lending to both large corporations and consumers, Goldman Sachs purchased $17 billion worth of online retail deposits last year from GE Capital Bank.
According to a statement, Genesis issued $1 billion in loans last year, up from $50 million in 2013.
The Wall Street Journal reported that house flipping continues to increase and the residential market continues to recover from the subprime mortgage crisis. Last year, borrowers took out $40 billion in fix-and-flip loans, the most since 2006.
“A lot more new home flippers are coming out of the woodwork,” said Alex Sifakis of JWB Real Estate Capital. They “have seen the (TV) shows.”
According to the bank’s president, Harvey Schwartz, lending activities are projected to shake out $2 billion in additional revenue. That is where the acquisition of Genesis Capital comes into play.
While terms have not been disclosed, the acquisition gives Goldman Sachs a business that makes loans of $100,000 to $10 million at rates of 7 percent to 12 percent. They don’t make loans to occupants, so real estate professionals looking to make renovations and turn a quick profit will be the key market.
Genesis made $1 billion of loans last year.
Goldman is buying the business from the private equity firm Oaktree Capital Management.
Wall Street firms’ appetite for “fix-and-flip” loans has been growing. Volumes last year were at their highest level in a decade. In recent months, affiliates of private-equity firm Blackstone Group LP and asset manager Fortress Investment Group LLC have each acquired companies that specialize in making these credits.
