While the majority of companies have real estate investment trusts that use short-term debt to fund long-term investments, Broadmark Realty Capital is taking a different route, according to a recent report from The Motley Fool.
"Broadmark is what is known as a hard money lender. It provides construction companies cash so they can purchase property and/or fund construction as they work on a project," according to the report.
"The loans tend to be short-term in nature, usually only lasting a couple of years. That helps reduce risk, since Broadmark isn't waiting 20 or 30 years to get paid."
The model has worked well for the company which has issued $2 billion in loans and only $400,000 in write-offs in just about a decade, according to the report.
"It focuses on speed and, as noted, values loans on the project they are secured by. Builders are willing to pay a premium for these valuable traits, with interest rates on the loans Broadmark makes often in the mid-teens area," according to the report.
"That's a premium that tends to hold in good markets and bad, making this is a lucrative niche."
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