Crowdfunding is on the Rise
Crowdfunding has received more attention than any other “big idea” in real estate during the beginning of 2015. A recent article from TheRealDeal.com describes the crowdfunding phenomenon as being the most successful advent to the New York City real estate network. “Crowdfunding allows investors to put their money directly into real estate projects of their own choosing, rather than investing blindly through a middleman such as a real estate investment trust or a pension fund,” writes Hiten Samtani.
Take Fundrise.com for example, a innovative idea that allows building owners to create their own personal profile describing the project they are funding. Potential investors are then allowed to decide to put in as little as $5,000. According to therealdeal.com, the concept is getting a lot of financial backing. People enjoy having the ability to put their money where they would like to and to grant someone that opportunity, is a new concept for real estate!
“I think the concept of democratic investment in real estate has the opportunity to grow dramatically if managed and done well.” – Tal Kerret (President of Silverstein properties)
Moreover, companies that use crowdfunding rely on various business models to earn their money. Companies like Fundrise.com, Realty Mogul, Realty Shares, Crowd Street, Collaperty, Groundbreaker, CrowdBaron, iFunding and Prodigy Network are the top real estate crowdfunding platforms used to assist realtors and investors in their next crowdfunding endeavor.
Real Estate “Crowdinvesting”
According to the Crowdfunding Industry Report, there was $2.7 Billion dollars raised online as a result of crowdfunding in 2012. In 2013, an estimated $5.1 Billion dollars was raised online. Prior to now, a vast majority crowd funded dollars has come from rewards-based crowdfunding where people purchase products or experiences.
At first, real estate didnt seem like an obvious market for crowdfunding. Nevertheless, using crowdfunding in real estate seems to have caught on, though mostly for millionaire-accredited investors. Keep your eyes open for the several firms vying to become the Kickstarter of real estate!