Washington, DC, United States (4E) – Real estate crowdfunders continue to lay the foundation for new property developments after raising $135 million for builders last month. And while doing so, crowdfunding sites are spurring new online fundraisers for the industry and drawing more small investors to the property market.
Three-year-old crowdfunder EarlyShares had just expanded its online fundraising campaign to include real estate via a partnership with listings portal Property.com. Both are integrating their services so by late summer the EarlyShares platform will start inviting investors.
Property-investment advisory firm Carlton Group used to solicit funds out of public view but it recently started a crowdfunding website aimed at drawing investments of more than $1 million.
Meanwhile, Raleigh, North Carolina-based Groundfloor has attracted Georgia residents to invest some $300,000 as of March because it solicits at least $100 and accepts everyone regardless of wealth or income. Groundfloor has funded an $82,000 single-family home fix-and-flip renovation and a $440,000 new construction of four townhome units for sale in the Atlanta suburb.
Other crowdfunding sites that appeal to both individual and institutional investors are Fundrise, Realty Mogul, RealtyShares, CrowdStreet, Collaperty, GroundBreaker, CrowdBaron, iFunding, Prodigy Network, and Patch of Land.
Nasdaq’s NerdWallet attributes the appeal of real estate crowdfunding to the chance it gives ordinary investors to have a diverse property portfolio across the country at a lower price and with a return of 12 to 14 percent annually. The real estate company being funded also takes care of all the work related to the investment.
Unlike investing in real estate investment trusts (REITs), which are companies that own real estate and can be bought on major stock exchanges, a crowdfunding investor knows exactly what property or building he or she is investing in. Moreover, the price of REITs tends to be driven by market sentiment rather than the actual value of the company’s assets, so they are vulnerable to a market downturn, just like other stocks, according to NerdWallet.
However, investing in real estate crowdfunding sites has its own risks. Investors may lose their money when tenants are not paying rent, an accident in the property results in a lawsuit, a defect is found, or the property is not selling well. So whether an investor is choosing crowdfunding or REIT, guidance will still be helpful. Investor education may be necessary through InvestView.com, for example.
The site offers analysis tools, education solutions and an application to help investors manage their portfolio. One of the tools is the Market Point, which simplifies stock research.
Investor technology and education company InvestView Inc. (OTCQB: INVU) of Red Bank, New Jersey provides the program plus financial educational courses that customers can subscribe to on the website; blogs, newsletters and other reference materials that describe investment strategies; and mentoring, coaching, and advisory services also on a subscription basis.