Crowdfunding has revolutionized the economy by giving people more opportunity to invest in business projects. The Jumpstart Our Business Startup Act of 2012 allowed startups and corporations to publicly market their need for revenue. It didn’t take long for the concept to find a place in real estate. This basically made private markets open for public consumption. People that were once unable to sit at tables of million dollar deals could now contribute smaller portions. This granted ownership based on how much they chipped in.
RealtyMogul has become one of the leading real estate crowdfunding corporations. Being in the game for two in a half years with a focus on finding accredited investors for equity deals, RealtyMogul raised $35 million in 2015. With their name growing so has the industry and skeptics are questioning whether real estate crowdfunding has what it takes to last long-term. The company’s chief investment officer (CIO) Timothy Li shared his thoughts during an interview with Knowledge@Warton
Despite the growing popularity of this sector and crowdfunding as a whole, Li feels his company offers a personal touch overlooked by competitors. Li is confident that real estate crowdfunding is still thriving and far from its peak. Speculations of a “shake out” seem the farthest thing from his mind considering its’ a fairly new industry with vast potential to grow. Congress just recently approved a new bill set to enact this year allowing non-accredited investors to partake in real estate crowdfunding. This will allow individuals with a smaller net worth full access to these crowdfunding platforms. With hope on the horizon, Li believes real estate crowdfunding has a promising future.
Fundrise is a similar platform specializing in internet real estate investment trusts (eREIT). The company has accumulated a 9.7% annualized return during Q1 of this year. They too originate, invest and administrate a diverse portfolio of commercial real estate properties to consumers at $10.00 per share with a minimum investment of $1,000 and a maximum of $50,000,000. Purchase of these shares move at a rapid pace on a first come first serve basis. Presently, their portfolio consists of 9 unique properties nationwide with funding per property fluctuating anywhere from $837,000 to $5.51 million. They plan on funding a portfolio valued at $50 million. Fundrise stated that over 50,000 investment prospects have mentioned interests of their eREIT bids and anticipate the outreach to expand further as time progresses.
iFunding is one of the original crowdfunding organizations with a slightly different business model. Serving as a digital channel between institutions, iFunding holds less emphasis on utilizing the crowd. Rather than originating loans, this company purchases from institutional investors and carries it over to the crowd for additional support. They were hit with a handful of lawsuits earlier this year stirring up controversy in the crowdfunding arena. However, company spokesmen claimed that one of these verdicts worked in the best interest of their platform and continue to roll with the punches. Today, they closed a $730,000 raise on an 8 unit residential facility in Washington, DC partnering with Columbia Property Capital. Funding Founder and CEO of iFunding, William Skelley, made a statement to Crowdinsider, “Everyday iFunding strives to connect our investors with exceptionally performing commercial real estate projects backed by qualified sponsors. This deal was a great opportunity to do exactly that”
Even though there are now well over a hundred real estate crowdfunding platforms that are based in the U.S., it appears that there is still plenty of room to grow in that market.
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