Friday, 15 August 2014

Will Crowdfunding Change The Face Of Real Estate Investing ... | Real Estate Investing

Will Crowdfunding Change The Face Of <b>Real Estate Investing</b> <b>...</b> | Real Estate Investing

Will Crowdfunding Change The Face Of <b>Real Estate Investing</b> <b>...</b>

Posted: 15 Aug 2014 07:49 AM PDT

By now, unless you're living under a rock, you've heard about crowdfunding, and maybe even participated in a few yourself through something like a Kickstarter campaign. Did you know you can participate in crowdfunding for real estate investment deals?

While it's not a new concept, crowdfunding really exploded thanks to the Internet. Crowdfunding is just what it sounds like – it's where someone raises financial backing for something – a concept, product, business, idea –from a crowd, or large group of individual people.

For the person doing the donating, the payoff can either be in the form of a financial payout (equity crowdfunding) or some sort of reward or perk (donation and rewards-based crowdfunding).

Equity crowdfunding is controlled by the SEC because there is the actual selling of securities involved. But donation/reward crowdfunding is not regulated but is becoming big business.

In fact, there is a whole spin-off industry that is dedicated solely to fulfilling crowdfunding rewards. But anyway… you probably think of it most often in terms of experimental technology, gadgets and do-dads, start-up businesses, and even potato salad (that's a whole other story).

So what about real estate deals in crowdfunding?

In 2010, two guys started a business called Fundrise, the first real estate crowdfunding model. The point was to give everyone an opportunity to invest in real estate development and so far, 20,000 people have pooled their money to invest in over 30 deals around the US.

Through Fundrise, a participant can invest as little as $100 and gain the benefits that come from an investment deal. Anyone can do it. You don't have to be part of any special group or have tons of assets to spare. Over the past 20+ years, more than $100 billion has been invested in real estate from private equity sources. Will that number grow exponentially thanks to crowdfunding?

There is no doubt that crowdfunding is opening doors for ideas and also giving access and opportunities to individuals on both ends of the crowdfunding equation. But is this just a trend in real estate or is it a long-term, sustainable solution for developers and investors?

We'll have to wait and see what happens, but in the mean time it's important to know what's happening and what real estate investing doors are opening to new players.

I've been quietly investing in some crowdfunded deals just to get the experience and see how the process flows. I generally invest in apartment deals and note pools and, as a debt investor, I target a 9% return. One of my apartment investments paid off in less than 8 months!

Do you have any experience with real estate crowdfunding? What do you think of the idea? Sound off in the comments below.
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