Crowdfunding is making it possible for individuals and businesses to become commercial real estate investors. Real estate crowdfunding is a relatively new concept, but it’s catching on quickly. These new platforms allow investors to pool their money to fund commercial estate projects. There are a few key players pioneering realty crowdfunding, such as Fundrise, CrowdBaron and Realty Mogul. These companies differentiate the level of investment opportunity, some offering buy-in as low as $100, while others cater to accredited investors ready to invest millions.
Traditionally, real estate financing has been reserved for high net worth investors and private equity companies. The new crowdsourcing investment model, legitimized by the JOBS Act, has made real estate investing more accessible. Investors with community ties to the project, might better recognize the purpose and profitability of the building, and therefore, may be a better voice in the process.
Proving the success of the new concept, Fundrise recently raised $31 million from Renren (Chinese technology firm), Ackman-Ziff (Real Estate Group) and Silverstein Properties (owners of the World Trade Center Twin Towers).
The founders of Fundrise, Benjamin and Daniel Miller, recognized a missed opportunity in the commercial real estate investment field. The majority of commercial real estate projects were supported by private equity investors, far removed from the property, the project and the needs of the community.
Ben Miller elaborated, “That distance can result in a disconnect between what the community actually needs and what is being built. Moreover, the involvement of a number of intermediaries reduces the profits of the investors.”
Fundrise claims investors receive average returns of 12%-14% (after fees), which may not stretch very far if you only invest $100, but those returns are well worth the risk if you can pledge a few $100K.
Crowdfunding platforms are now looking to create investment opportunities for retail investors, institutional investors, as well as other real estate companies. Get in touch with the Intelica Asset Management team to discuss how crowdfunding could create opportunities in the Midwest.