*Prashant Gopal and Patrick Clark for Bloomberg News*
A decade ago, financial firms started offering small-time investors short-term loans to build new homes or renovate old ones, as well as longer-term debt for those who wanted to rent them out. The industry calls it “private lending,” which totaled more than $145 billion in 2025, according to real estate analytics firm Forecasa Inc.
In these deals, lenders will finance as much as 90% of a project, including the purchase price of the land and renovation costs, at a rate as low as 8% annually. Financial firms are depending on the home’s value after the project is finished. If the projection holds, the borrower ends up with 30% to 35% in equity, giving the lender some cushion against declining prices. Conventional banks and credit unions have dabbled in these loans, and companies have bundled some together into securities. But large investment firms—including private credit funds such as those run by KKR & Co.—have driven the surge.
Now some of the risks are becoming apparent in Cape Coral. Private lenders have started the foreclosure process on 7.4% of the 2,000 properties they financed in 2023, according to Forecasa. (Typical mortgages go bad at a rate of less than 2%, industry data show.) And the stress is growing. In 2025 private lenders made initial foreclosure filings on 326 homes, quadruple the figure two years earlier. Nationally, they spiked 82% during that period. “This is a fairly new market, and essentially we are at a turning point in the housing market,” says Tomasz Piskorski, a Columbia Business School professor of real estate who studies credit. “It has never been tested in a downturn.”
The strain in Florida demonstrates the latest turn in the evolution of homes from merely a place to live, financed with loans from local banks, to financial assets traded by investors worldwide.
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*Prashant Gopal and Patrick Clark for Bloomberg News*
A decade ago, financial firms started offering small-time investors short-term loans to build new homes or renovate old ones, as well as longer-term debt for those who wanted to rent them out. The industry calls it “private lending,” which totaled more than $145 billion in 2025, according to real estate analytics firm Forecasa Inc.
In these deals, lenders will finance as much as 90% of a project, including the purchase price of the land and renovation costs, at a rate as low as 8% annually. Financial firms are depending on the home’s value after the project is finished. If the projection holds, the borrower ends up with 30% to 35% in equity, giving the lender some cushion against declining prices. Conventional banks and credit unions have dabbled in these loans, and companies have bundled some together into securities. But large investment firms—including private credit funds such as those run by KKR & Co.—have driven the surge.
Now some of the risks are becoming apparent in Cape Coral. Private lenders have started the foreclosure process on 7.4% of the 2,000 properties they financed in 2023, according to Forecasa. (Typical mortgages go bad at a rate of less than 2%, industry data show.) And the stress is growing. In 2025 private lenders made initial foreclosure filings on 326 homes, quadruple the figure two years earlier. Nationally, they spiked 82% during that period. “This is a fairly new market, and essentially we are at a turning point in the housing market,” says Tomasz Piskorski, a Columbia Business School professor of real estate who studies credit. “It has never been tested in a downturn.”
The strain in Florida demonstrates the latest turn in the evolution of homes from merely a place to live, financed with loans from local banks, to financial assets traded by investors worldwide.
[Read the full story here.](https://www.bloomberg.com/news/features/2026-02-08/private-credit-loans-are-driving-foreclosures-in-the-home-flipping-market?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTc3MDY0MTE5NSwiZXhwIjoxNzcxMjQ1OTk1LCJhcnRpY2xlSWQiOiJUQTVVR0FLR1pBTEMwMCIsImJjb25uZWN0SWQiOiJEMzU0MUJFQjhBQUY0QkUwQkFBOUQzNkI3QjlCRjI4OCJ9._3CNoaKLBgB340HYtR6NSCITuwzsWNc2qx9EcpFkSuA)