Crowdfunding has crowded me out?

Question

Hi all,

I've been researching various RE crowdfunding sites to park some money (and gain interest) while I save up for more properties and have found nothing but dead ends. Many only allow accredited investors. Groundfloor allows little fish like myself to invest, however, from what I can tell when I joined the site to invest, they are not accepting investors from my state, Rhode Island.

Thoughts? Ideas maybe where else one can park some money to make GOOD interest, as local bank CDs and putting it under the bed like your uncle from yesteryear really gains no interest compared to inflation.

Thanks for your time and help.

Robin Adams · Answer

Hi Marc, you could become an equity partner on a flip. Pl will lend 75-80% ltv and your left trying to come up with the remaining down payment. My last flip I brought in a equity partner to get the deal done since I didn't have the 20%. In the end everyone got paid. I managed the deal & put in the time. Pm me if your interested and we can meet for coffee. I'm local as well.

Amy Wan · Answer

@Marc Belisle if you plan to do a lot of investing and can justify the transactional cost, you might just consider opening an LLC for your investments in another state (i.e. delaware), whose residence would be in that respective state, not RI

Anthony Thompson · Answer

This is definitely a complicated area. It seems that while there are Federal rules allowing crowdfunding, it's up to states to adopt rules allowing it also, and so far only 30 states have done so (and, not surprisingly, Rhode Island isn't one of them).

However it's not clear what the difference is between "intrastate" funding rules and within-state-only rules; maybe there's a special case for a RI company getting funding from RI investors only, if that would apply. That first article says:

Anthony Thompson · Answer

Marc, there are also some "peer to peer" lending companies like Lending Club which may be available to you, though I've read mixed reviews of them online.

Here are a couple of articles I bookmarked on the topic: Peer-to-peer lending: From the people, for the people; and Wall Street's Takeover Of Peer-to-Peer Lending Almost Complete.

Also, the Mister Money Mustache forums seem to have some good commentary on specific companies such as Lending Club (since MMM was an early user/proponent of it - not sure where he stands on it now).

Jillian Sidoti · Answer

Ian misspoke. Those are all for unaccredited investors. They all have Regulation A offerings.

Ian Ippolito · Answer

@Marc Belisle,  there are three national sites where accredited investors can invest: Rich Uncles, Realty Mogul and Fundrise.  Each has its strengths and weaknesses. If you're interested in learning more, I did an in-depth article comparing them to help investors choose the best one for them . B. P. doesn't allow links to your own side, so do a Google search on " The real estate crowdfunding review non-accredited investor options part 1"  to find it.

However, it's important to understand that all of these investments are not for short term money and not replacements for liquid CDs . They have fees and penalties if you withdraw your money before 3 to 5 years  because they themselves are investing in an illiquid object: real estate.  And  you have a much higher risk of losing your principal, than a CD.  In  general, a higher return means a higher risk.

So if you're saving up money for something to buy next year, say, real estate equity is probably not your best option, and a cd may actually not be so bad.

Greg Westergard · Answer

@Cody L.  Well said, for both sides of the spectrum. If only congress was so amenable and willing to compromise...

Marc Belisle · Answer

@Amy Wan yes this state is EXTREMELY anti-business and very high tax, tons of burdensome regulations. It will prob be a long time until it's available here.

Amy Wan · Answer

Theres probably a regulatory reason why they're not offering it in Rhode Island. In which case, call your government/state regulator to complain. The regulatory barrier is probably too high to justify selling securities in the state.

Crowdfunding has crowded me out?

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