Using Crowdfunding for Investment Capital - The Next Big Thing

Creative Real Estate Financing
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Using Crowdfunding for Investment Capital - The Next Big Thing

Zack Bloom
Greenwich, CT · Member since 2017 · 30 posts · 9 votes

A very interesting read on using equity crowdfunding for real estate investment capital - http://miamiherald.typepad.com/the-starting-gate/2.... Different from donation based crowdfunding sites like Kickstarter, equity crowdfunding was only recently legalized by the 2012 JOBS Act that allows crowdfunding to be used for startups and ventures. 

Fundrise and RealtyMogul are some of the real-estate crowdfunding sites that popped up recently for funding real estate investing through crowdfunding. What are your thoughts? Would you use crowdfunding platforms for real estate seed capital?

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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
9y

All popular, successful real estate EQUITY crowdfunding platforms heavily vet the deals they offer; i.e. most only accept heavily capitalized, experienced sponsors with a verifiable track record.  There are some secondary platforms that will accept any deal in which the sponsor pays an upfront fee; their success rate is very low.

Real estate DEBT crowdfunding platforms are more concerned with the property and deal, as long as you have the 25-40% down payment requirement.

Private Mortgage Financing Partners, LLC
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  • Jillian Sidoti
    Professional · Murrieta, CA · Member since 2013 · 405 posts · 458 votes
    9y

    Zack, crowdfunding is awesome, but it isn't a magic bullet. 

    1. You have to find the right cf platform for your deal. A platform that did a successful raise for one deal won't necessarily be right for yours. 2. You have to make sure a platform will take you. Cf platforms have their own underwriting requirements and many of them are quite choosy. 3. You can't totally rely on the platform for marketing. You have to bring your own crowd to the deal to ensure success. I hope this was helpful. 

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  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    9y

    All popular, successful real estate EQUITY crowdfunding platforms heavily vet the deals they offer; i.e. most only accept heavily capitalized, experienced sponsors with a verifiable track record.  There are some secondary platforms that will accept any deal in which the sponsor pays an upfront fee; their success rate is very low.

    Real estate DEBT crowdfunding platforms are more concerned with the property and deal, as long as you have the 25-40% down payment requirement.

    Private Mortgage Financing Partners, LLC
    WebsiteView Page
    2Reply
  • Zack Bloom
    OP
    Greenwich, CT · Member since 2017 · 30 posts · 9 votes
    9y

    @Jillian Sidoti thanks for your insight! I didn't realize how particular they were with choosing someone to fund. Definitely helpful, I guess it doesn't translate to making it easy like those kickstarter projects.

    @Don Konipol interesting note about debt crowdfunding platforms, I haven't looked into those until now. I found a list of debt crowdfunding sites here. I've heard that Lending Club got in a lot of trouble recently, do you have any insight on that? Is it risky to use a platform like that for seed capital?

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  • Jillian Sidoti
    Professional · Murrieta, CA · Member since 2013 · 405 posts · 458 votes
    9y

    no problem, Zack. Don't hesitate to reach out if you need anything.

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  • Joshua Greenberg
    San Francisco, CA · Member since 2017 · 41 posts · 20 votes
    9y

    @Zack Bloom I think these are interesting approaches from a creative financing perspective but I think you'll see more success with traditional funding like finding an equity partner or other debt financing. I think maybe 5-10 years down the road if these platforms really take off things might be different, but I just don't see adoption at those levels yet, at least in real estate. A nice read though!

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  • Shiela Zhao
    Bladensburg, OH · Member since 2017 · 40 posts · 10 votes
    9y

    I have a friend that used lending club for getting seed capital for a startup she was working on. Would be interesting to see it used toward REI

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