Thinking about crowdfunding your next real estate venture? Let's walk through the basics. Below is a slide deck I use at our monthly Florida Real Estate Crowdfunding Meetup.
What is crowdfunding?
Crowdfunding is a method to raise capital online through the collaborative efforts of friends, family and investors alike.
charities, new products, startups
A federal or state exemption from the registration requirements under the Securities Act of 1933
506(b) - no advertising permitted
506(c) - general solicitation allowed
Regulation A+
Access to capital and investment opportunities not previously available to borrowers and passive investors
How can it be applied to real estate?
Access to debt and equity capital for:
Fix-and-flips
Single family rentals
Multifamily
Other
Increased access to investment opportunities regardless of geographic location
Buying interests in real estate investments similar to buying stock online.
Who are the participants?
Investors
Regulations determine the type of investors eligible to participate. Accredited investors have to meet income / net worth requirements and unaccredited investors are subject to investment limits.
Borrowers / Sponsors
Experienced real estate professionals seeking bridge financing for fix-and-flips, rental properties, new construction, etc.
Platforms
Platforms curate or aggregate deal flow and manage the record keeping, cashier function, compliance, investor reporting, etc.
By the numbers
Over the two-year period ended September 2015, total capital raised for real estate development and investment in the United States through crowdfunding was $208.3 million. * That represents almost a quarter of the $870 million committed since September 2013 through the 506(c) clause of the JOBS Act
Financial technology companies are transforming the way borrowers access credit and how investments are made by leveraging new regulations and powerful user interfaces.
Have any of you participated in real estate crowdfunding? Let's connect and exchange notes!
