The applications for crowdfunding are endless. Up until this point, we’ve seen sundry creative, technological and even bio-medical projects thrive, but one industry slow to join-in has been real estate. Unlike these other areas, it’s hard for entrepreneurs in real estate to get their foot in the door financially, as there are less programs, grants and basic funding options available. But this is precisely why crowdfunding real estate works, and now it’s beginning to catch on.
Crowdfunding real estate enables the public to invest in what used to be an exclusive market. Instead of several large contributions made from deep-pocketed investors and private-equity firms, hundreds of locals can pitch-in for ownership of a new property, splitting its rent and annual income. In a way, crowdfunding real estate transfers the power back to those in the immediate area. So, for example, those who want a coffee shop in the neighbourhood will see to it that it happens.
Thanks to the lift on the solicitation ban, real estate enthusiasts now have an easier time finding and promoting properties. With portals such as Fundrise, Property Peers, Realty Mogul, Prodigy Network and Primarq, this process has never been easier. Primarq, specifically, is an interesting portal to talk about, as it uses equity-share financing for residential purposes. Most other portals deal strictly with commercial properties. Portals like Primarq give homeowners the opportunity to purchase homes otherwise outside of their price-range. By co-owning a house with an investor, the shares of the home may be divided, but both parties have still benefitted in some way.
The concept of crowdfunding real estate is subject to debate. For one, as Fundrise co-founder Ben Millier suggests, “The public will help you build your real estate, but actually over time you realize that the public is an incredible partner… [When] you democratize an investment in real estate, not only do you get capital, you actually get a social power that wasn’t possible before.” On the flip side of things, some specialists are concerned of scams, especially for projects not yet under construction.
Crowfunding real estate opens the doors to a lot of opportunities, but also to a lot of hazards. It will be interesting to see how these portals fare as the final SEC judgement nears. What are your thoughts?