Many people associate Crowdfunding with investments in exciting new technology companies that promise to transform the world and make millions for their owners. But Crowdfunding is just as relevant to investing in real estate, whether vacant lots, apartment buildings, or multi-billion dollar redevelopment projects. Although the world of real estate investing has historically been separate from the world of business investing, Crowdfunding is likely to revolutionize capital formation (fundraising) in both worlds.
Pending the release of SEC regulations that will authorize “true” JOBS Act Crowdfunding, portals focused on real estate have already sprung to life using the legal model approved by the SEC in two no-action letters earlier this year. RealtyMogul, for example, allows accredited investors who have signed up with the site to view a variety of real estate investment opportunities, from single-family rehab projects to a 240-unit apartment complex. The size and complexity of real estate projects listed on RealtyMogul and other portals are certain to grow as the Crowdfunding market matures, probably dramatically.
Real estate might even lend itself to Crowdfunding in ways that other industries do not. Because all real estate is local, it is easy to imagine a portal that specializes in Philadelphia real estate, for example, or in commercial Philadelphia real estate, or in commercial real estate in Center City, Philadelphia. That kind of focus, repeated in other cities and regions, might give investors exactly what they are looking for and thereby provide a reliable source of capital for developers.
It is just as easy to imagine a portal focused on shopping malls, or on high-end residential projects, no matter where they are located.
Real estate might seem less sexy than hi-tech, but it is a source of enormous wealth in this country and an important contributor to the national economy. And because real estate requires capital – oceans of capital – Crowdfunding is certain to play an important role.
Questions? Let me know.