Real Estate Crowdfunding 103: The World of Real Estate Crowdfunding Sites

Posted by Boots Dunlap on May 8, 2019 12:06:15 PM

In the last two articles in this series, we discussed two key differentiators in real estate crowdfunding: differentiation of platforms and differentiation of offerings

  • Differentiators in offering refer to the regulatory offering types (accredited vs non-accredited investor offerings), which are of the utmost importance to real estate sponsors thinking about raising capital online. 
  • Differentiators in platform refer to both the purpose (marketplace vs captive) and the incentives behind the platform, which is a critical investment due diligence item for anyone intending to invest through crowdfunding.

To date, the most successful real estate crowdfunding websites tend to be crowdfunding marketplaces focused on accredited investor offerings.  These include CrowdStreet.com, RealCrowd.com, and EquityMultiple.com.  Because these sites attract multiple sponsors (a marketplace) and can bring more money to real estate transactions (no fundraising cap), they garner the highest quality deals and attract the greatest quality and quantity of investors.  In addition, they protect their brand by vetting the deals and sponsors before permitting them to market their offerings on their platform. 

There has been a glut of crowdfunding platforms erected with the hopes of emerging as the real estate crowdfunding market leader.  However, this glut has outpaced user-adoption.  As a result, numerous crowdfunding companies have closed down or consolidated as they have struggled to generate the fee income required to outpace their large overhead. 

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Topics: Investment, Investors, Crowdfunding

Real Estate Crowdfunding 102: What Investors Should Know

Posted by Boots Dunlap on Apr 4, 2019 2:22:15 PM

In the previous post on real estate crowdfunding, we covered the regulatory structures of crowdfunding offerings and the impact that those offerings have on sponsors.  In this post, we’ll look at two distinctly different types of crowdfunding platforms that every investor should be aware of and how each affects the investor’s ability to find great deals.  The differentiators discussed below expose the business strategies, and more importantly the incentives, behind crowdfunding platforms that impact the investor.

There are two major types of crowdfunding platforms: crowdfunding marketplaces and captive crowdfunding sites

  • Crowdfunding marketplaces are websites built to be a truly independent and free marketplace for investors and sponsors.  The crowdfunding marketplaces are created to provide the investor community with deals from numerous sponsors, most often pre-approved for quality control. 
  • Captive crowdfunding sites are sites created by a real estate sponsor to satisfy a specific business need.  They do not necessarily find the investor the absolute best deal in the available market.
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Topics: Investors, Crowdfunding

Real Estate Crowdfunding 101: What Sponsors Need to Understand

Posted by Boots Dunlap on Mar 20, 2019 11:48:17 AM

Real estate crowdfunding has been quietly evolving on the sidelines during the latest commercial real estate bull market.  Critics dismissed this new form of capital raising as just another fad or buzzword du jour.  However, crowdfunding platform founders claim that it is destined to overtake traditional capitalization methods in the not too distant future.  Regardless, the major objections to crowdfunding are dissipating rapidly as advancements in supporting technology trends (to be discussed in a subsequent post) allow for greater investment transparency and growing user-adoption.  As this industry matures, real estate investors and sponsors will be able to connect more efficiently, creating greater competition for capital and deals.  This increased efficiency and competition will result in a broader demand for quality deals and cheap equity.  However, before market participants may hope to reap these benefits, they should first be aware of the basics of crowdfunding.

Over the course of a series of posts, I intend to cover some of the key differentiators of crowdfunding platforms that affect investors and sponsors.  These consist of two major areas: differentiation of platforms and differentiation of offerings.  While both platforms and offerings have significant effects on both investors and sponsors, investors should be more concerned with understanding the platform, and sponsors with understanding the offering.

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Topics: Private Credit, Sponsors, Crowdfunding