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Real estate crowdfunding
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Real Estate Crowdfunding is the online pooling of capital from investors—the "crowd"—to fund mortgages secured by real estate, such as “fix and flip” rehabs, and equity for commercial and residential projects, acquisition of pools of distressed mortgages, home buyer down payments and similar real estate related outlets. [1]

JOBS ActEdit

On September 23 2013, Title II of the JOBS Act went into effect, leading to a surge in equity-crowdfunding and opening the door for small businesses and startup companies to publicly advertise their investment opportunities.[2][3] The enactment of Title II was a pivotal moment for real estate crowdfunding as it allowed for the creation of a marketplace for different platforms focusing on varying aspects of real estate investing.[4] Title II permits businesses to solicit capital only from accredited investors.[5]

Accreditation RequirementsEdit

According to the SEC, an accredited individual has an annual income of $200,000 or more, or, a combined income of $300,000 or more with their spouse. A person also qualifies as an accredited investor if their net worth is at least $1 million, or if they have a trust with assets amounting to at least $5 million.

Types of Real Estate CrowdfundingEdit

New Property DevelopmentEdit

Real estate crowdfunding has been used to fund new development projects such as retail centers, office buildings and multifamily properties.[6] The enactment of Title II has given real estate developers more outlets to obtain funding for their projects as opposed to previous methods such as bank loans and personal networking.[7]

RennovationEdit

Some real estate crowdfunding platforms offer opportunities to invest in the rehab or “fix and flip” of commercial properties.[8] Residential rehab projects have also been funded by real estate crowdfunding.[9]

MortgageEdit

Real estate crowdfunding also provides the opportunity to invest in other real estate related opportunities, such as distressed mortgages or borrower down payments.[10] A platform may purchase a pool of distressed mortgages and offer investors equity in these pools. Mortgages are real estate secured, providing collateral.

PlatformsEdit

Large national platforms along with local operators have launched sites.[11] Real estate crowdfunding provides developers the ability to raise capital with a transparency and agility often lacking in the more traditional providers such as debt and equity providers, hard money lenders and private equity sources.[12] The platforms offer low minimum investments, often $100 - $10,000 plus the online convenience of reviewing offerings, signing documents and funding.[13] The low minimum investments enable investors to diversify across multiple projects and platforms if they choose. Returns are above-market compared to bank CD's and more traditional income investment options, and even compared to peer-to-peer lending platforms such as Lending Club and Prosper.[14]

Growing MarketplaceEdit

Following the legislation of the JOBS Act and the enactment of Title II, equity crowdfunding in the U.S quickly grew in popularity.[15] Less than a year after Title II passed, U.S real estate crowdfunding platforms had generated more than $500 million in transactions.[16]

The first 50 real estate crowdfunding platforms in the United States.[17]

  • aCrowd
  • American Colonial Capital Fund
  • American Homeowner Preservation
  • Asset Avenue
  • Blackhawk Investments
  • Carlton Accredited Equity
  • CCFG Investments
  • Creative Equity Group
  • CrowdMason
  • CrowdStreet
  • CrowdTranche
  • CrowdVested
  • CrunchBase
  • CRWD
  • DiversyFund
  • EquityHunt
  • ForeFund Capital
  • Fquare
  • Funding Hamptons
  • Fundrise
  • Gizmo
  • Global Groupfund
  • Ground Floor
  • GroundBreaker
  • High Income Real Estate
  • iFunding
  • Loquidity
  • Money 360
  • NexRegen
  • NXGen Capital, Inc.
  • OpenSource Capital
  • PassiveFlow
  • Patch of Land
  • Primarq
  • Prodigy Network
  • ProHatch
  • Prop Funds
  • Propellr
  • Real Circle
  • Real Liquidity
  • RealCrowd
  • Realquidity
  • RealRite
  • Realty Mogul
  • RealtyShares
  • Rich-Uncles
  • Sequorum
  • Sharestates
  • Sprovy
  • Tycoon Real Estate

ReferencesEdit

  1. Brown, Eliot and Simon, Ruth. 11 June 2014. Real-Estate Sector Moves Crowdfunding Beyond the Trinkets. http://online.wsj.com/articles/real-estate-sector-moves-crowdfunding-beyond-the-trinkets-1402526777
  2. Alois, JD. 20 January 2014. Outlook For Debt And Equity Crowdfunding To Be Discussed At Crowdfund Global Expo. http://www.crowdfundinsider.com/2014/01/30367-outlook-debt-equity-crowdfunding-discussed-crowdfund-global-expo/
  3. Barnett, Chance. 23 September 2013. The Crowdfunder's Guide to General Solicitation And Title II Of The JOBS Act. http://www.forbes.com/sites/chancebarnett/2013/09/23/the-crowdfunders-guide-to-general-solicitation-title-ii-of-the-jobs-act/
  4. Wiggin, Teke. 23 September 2013. Crowdfunders get a boostas JOBS Act provision kicks in. http://www.inman.com/2013/09/23/crowdfunders-get-a-boost-as-jobs-act-provision-kicks-in/
  5. Anderson, Bendix. 23 June 2014. How Big Could Crowdfunding Get for Real Estate Investors? http://urbanland.uli.org/capital-markets/big-crowdfunding-get/
  6. Openshaw, Jennifer. 9 February 2014. How to use crowdfunding to invest in real estate. http://www.marketwatch.com/story/how-to-use-crowdfunding-to-invest-in-real-estate-2014-02-07
  7. Lawlery, Ryan. 16 April 2014. RealtyShares Raises $1.9 Million From General Catalyst To Crowdfund Real Estate Projects. http://techcrunch.com/2014/04/16/realtyshares-1-9m-general-catalyst/
  8. Dhue. Stephanie. 30 March 2014. Vacant DC building shows crowdfunding's range. http://www.cnbc.com/id/101534310
  9. www.inman.com. 12 December 2013. Crowdfunding startup Patch Of Land funding NJ developer rehabs. http://www.inman.com/wire/crowdfunding-startup-patch-of-land-funding-developer-rehabs-in-nj/#.U9kBloBdXXx
  10. Rodkin, Dennis. 30 October 2013. For Chicago Investors, Helping A Struggling Homeowner Can Payoff. http://www.chicagomag.com/real-estate/October-2013/Now-Investors-with-10000-Can-Help-Struggling-Families-Stay-in-Their-Homes/
  11. Dahlberg, Nancy. 7 July 2014. Developers turn to crowdfunding to seed real estate deals. http://www.miamiherald.com/2014/07/06/4221997/developers-turn-to-crowdfunding.html
  12. Ebrahimi, Rod. 12 December 2013. How Crowdfunding Could Reshape Real Estate Investing. http://www.forbes.com/sites/rodebrahimi/2013/12/12/how-crowdfunding-will-impact-real-estate-investing-an-interview-with-realtyshares/
  13. Drake, David. June 10 2014. Real Estate Crowdfunding: Post-Valuations Of $100M For Series A? http://www.forbes.com/sites/groupthink/2014/06/10/real-estate-crowdfunding-post-valuations-of-100m-for-series-a/
  14. Morales, Gerald. 6 June 2014. Why Real Estate Crowdfunding Will Be Loved By You, the Lazy Investor. http://www.mybanktracker.com/news/real-estate-crowdfunding-investment
  15. Alois, JD. 20 January 2014. Outlook for Deb and Equity Crowdfunding to be Discussed at Crowdfund Global Expo. http://www.crowdfundinsider.com/2014/01/30367-outlook-debt-equity-crowdfunding-discussed-crowdfund-global-expo/
  16. Drake, David. June 10 2014. Rapid Growth of Realty Crowdfunding Platforms in the US. http://timesrealtynews.com/featured/rapid-growth-of-realty-crowdfunding-platforms-in-the-us/#axzz37vIJ9Jqj
  17. Newbery, Jorge. 17 July 2014. The First 50 Real Estate Crowdfunding Platforms. http://www.huffingtonpost.com/jorge-newbery/the-first-50-real-estate-_b_5575474.html

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