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When Online Lending Meets Real Estate: Examining Investment Decisions in Lending-Based Real Estate Crowdfunding

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  • Yang Jiang

    (School of Business, Nanjing University, Nanjing, 210093 Jiangsu, China)

  • Yi-Chun (Chad) Ho

    (School of Business, George Washington University, Washington, District of Columbia 20052)

  • Xiangbin Yan

    (Donlinks School of Economics and Management, University of Science and Technology Beijing, 100083 Beijing, China)

  • Yong Tan

    (Michael G. Foster School of Business, University of Washington, Seattle, Washington 98195)

Abstract

In lending-based real estate crowdfunding, borrowers are required to pledge their housing properties as collateral to secure the loans. This nascent practice differs from ordinary peer-to-peer lending in that lenders, to make sound investment decisions, need to process additional information other than basic loan attributes. We examine how lender behavior of investing in real-estate-secured loans is shaped by information that is particularly relevant in such an emerging market. We collect and analyze the data from a large lending-based real estate crowdfunding platform, where each loan is secured by either a mortgage (a mortgage-secured or MS loan) or a borrower’s own house (a house-secured or HS loan). Our analysis reveals that lender decisions of how fast to invest and how much to invest are influenced by both on-platform and off-platform information. For on-platform information, we find that lenders as a whole prefer HS loans to MS loans, as reflected in quicker and larger lending transactions. Experienced lenders tend to invest more aggressively, in both time and amount, but exhibit a weaker preference for HS loans as compared with their inexperienced counterparts. As to off-platform information, our results show that a rise in housing prices is associated with quicker investment decisions, and this association is found to be even stronger on HS loans. Further, when stock market volatility is large, lenders tend to slow down their investment behavior; however, we find such a tendency weaker on MS loans. This research contributes to the literature by establishing relationships between crowdfunding activities, housing prices and stock market performance. Our findings also provide implications for managers and platform designers who desire to stimulate and leverage the fundraising momentum.

Suggested Citation

  • Yang Jiang & Yi-Chun (Chad) Ho & Xiangbin Yan & Yong Tan, 2020. "When Online Lending Meets Real Estate: Examining Investment Decisions in Lending-Based Real Estate Crowdfunding," Information Systems Research, INFORMS, vol. 31(3), pages 715-730, September.
    • Handle: RePEc:inm:orisre:v:31:y:2020:i:3:p:715-730
    DOI: 10.1287/isre.2019.0909
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    6. Kreppmeier, Julia & Laschinger, Ralf & Steininger, Bertram & Dorfleitner, Gregor, 2023. "Real Estate Security Token Offerings and the Secondary Market: Driven by Crypto Hype or Fundamentals?," Working Paper Series 23/6, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
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    8. Alexandra Mora-Cruz & Pedro R. Palos-Sanchez, 2023. "Crowdfunding platforms: a systematic literature review and a bibliometric analysis," International Entrepreneurship and Management Journal, Springer, vol. 19(3), pages 1257-1288, September.
    9. Shengsheng Xiao & Yi‐Chun (Chad) Ho & Hai Che, 2021. "Building the Momentum: Information Disclosure and Herding in Online Crowdfunding," Production and Operations Management, Production and Operations Management Society, vol. 30(9), pages 3213-3230, September.
    10. Mendelson Haim & Zhu Mingxi, 2024. "Optimal Information Acquisition Strategies: The Case of Online Lending," Papers 2410.05539, arXiv.org.
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