Real Estate Crowdfunding

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Don Konipol
  • Lender
  • The Woodlands, TX
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The “Over Promise, Over Hype” of Crowdfunding Real Estate

Don Konipol
  • Lender
  • The Woodlands, TX
Posted Dec 22 2021, 07:51

Remembering 10 years ago when all the hype about crowdfunding real estate first started. People called it a game changer, going to “democratize” real estate investing, make syndicators transparent, put the little guy on equal footing with the major players, and allow every investor to enjoy the superior returns once reserved for wealthy investors only.

Well, if measured against the projections, crowdfunding real estate has failed miserably for investors. My feeling is that AT BEST returns to investors have been no better than returns from passive non crowdfunded investments. And in some cases they may be a lot worse. We’ve seen people with little or no experience in the real estate investment field raise some significant capital from passive investors and then screw up even basic investments. We’ve seen major players with venture capital backing deliver subpar returns and platforms touting their “transparency” go dark after a series of poor investment decisions.

Full disclosure: I am managing partner of two real estate related private funds that utilize some crowdfunding technology.

Here are the reasons I believe that the crowdfunding industry results have been disappointing

1. The technology of crowdfunding did not change the basics of making a profitable real estate investment. It merely made it easier to raise capital and easier to participate as a passive investor

2. The business model of most real estate crowdfunding businesses was to hire top notch technology workers and relatively new and inexperience real estate people. This showed in the results. I know about this first hand as my partner and I were hired by a major real estate crowdfunding platform to show their real estate “specialists” how to invest in commercial properties. You’d think they’d hire experienced, competent people to make investment decisions, but you’d be wrong!

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