Crowdfunding Real Estate

4 Replies

I would like to know more about crowdfunding but I can truly just not grasp it, I can’t seem to understand how will somebody receive payments in dividends of a real estate transaction? Are there any books or pdfs that anyone has that can truly explain crowdfunding in depth. Online it just seems to give the concept and just a little more. But I’m truly trying to learn the in’s and out’s of it.

Crowdfunding in real estate allows syndicators to raise money from the mass public.  It is extremely expensive and hard to get approved to legally use crowdfunding for real estate.  Research the difference between 506B, 506C, and Crowdfunding.  506B is the best place to start for raising money, generally.  Not sure if this answers your question but hope it helps. 

To best answer your question, you can find plenty of information on the education sections of all the crowdfunding platforms that are out there. They go above and beyond to educate the public in an effort to get you to use their platform whether it is to raise capital for or invest in a project. @ian might chime in when he sees this post and you'll find plenty of information on his site "the crowdfunding review". 

The term crowdfunding is used rather loosely to describe all forms of raising capital (funding) from a large group of investors (crowd) typically via an "online investment platform" (fancy way of saying website). However different rules apply to different methods of raising capital or better yet who's investing or allowed to invest. 

@Brock Mogensen mentions 3 in his post above: Regulation Crowdfunding and Regulation D rules 506c and 506b, there's also Regulation A. I won't get into the details here but the main differences are the registration requirements and whether accredited or non accredited investors can invest. There is so much to read about each set of rules that you should just determine which one works best for what you want to do research that specific rule.

Rory, are you looking to understand crowdfunding from the point of view of investing in crowdfunding deals? Or from the point of view of being a sponsor and getting investors to invest in your own deals through it? If it's the former, there are several different legal structures that can be used. If it is structured as a REIT, then it does indeed pay dividends. If it is structured as a traditional LLC, then while it does pay out the cash flow generated, it is not categorized as dividends for tax purposes but considered nonpassive income. Please be aware that I am not an accountant or attorney, so always consult with your own before making any investment decision (or before setting up a syndication of your own)