What You Need to Know About SBRE
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What is SBRE?
SBRE stands for Small Balance Real Estate. It’s a fairly new term used to refer to a real estate asset based business model where the equity capital required to do the deal is $2,000,000 or less. Most often the average deal size is far less e.g, $100,000 or $500,000. When we talk about private equity lending, these are predominantly the kinds of deals we are talking about. An SBRE could be a construction loan, rehab or fix and flip loan, small commercial bridge loan, shared appreciation loan, or loan to self-directed IRAs so long as the deal is real estate (equity) secured.
From this you can gather there is no simple answer to what a SBRE is, but let me qualify it as plainly as possible. What all SBRE’s have in common is that they use real estate as the cornerstone collateral component to securitize deals. This is the key component of what makes them attractive to you (and if you are in this business, your investors). However, keep in mind that to do business effectively in this manner you need a continuous stream of liquidity to handle deals at a high volume, which rest on your ability to evaluate deals in a realistic way. Valuations as well as performance usually work hand in hand.
Food for thought,
Nathaniel S. Fulford