There is high demand for crowd funding as investors are looking for alternative ways to get into commercial real estate. Multiple investors are coming together to fund small real estate deals and get a piece of the equity and cash flow return. It is estimated that real estate crowdfunding could potentially reach $2.5 billion by the end of 2015. Crowdfunding is giving small investors the ability to break into small real estate investing. For example, “one high-profile Southern California [entity], was the move last year by Kittridge Hotels & Resorts LLC to sell a 15 percent share of ownership in the Hard Rock Hotel Palm Springs — worth more than $1.5 million — to 85 investors located throughout the country…” The Securities and Exchange Commission says, “investors in such transactions must have annual income of $200,000 or a net worth of higher than $1 Million”. As multiple small investors get involved in real estate deals, more compliance and regulation will be needed by the Securities and Exchange Commission to protect unaccredited investors.
Excerpts from the Article:
The crowdfunding sites enable qualified investors to buy shares in specific buildings and projects, which is different from traditional investment vehicles such as real estate investment trusts, which sell shares in entire property portfolios. Crowdfunding investors typically are able to share in rents and other revenues generated by properties, as well as profits gained when the properties are sold.
The websites take fees from sellers and investors for acting as middlemen, and allow users to invest sums as little as $100 in properties, with the average investments reported by the sites ranging from $10,000 to $50,000.
Citation and Link:
Hirsh, Lou. “Crowdfunding Moves Into Real Estate.” San Diego Business Journal. 13 Mar. 2015. Web. 18 Mar. 2015
Picture Link and Citation:
Cristinav. “Crowdfunding real estate insight by Prodigy Network.” 12 Jun. 2013. “totalasset: innovation and strategy for funds and investors.” 12 Jun. 2013