WHAT IS CROWDFUNDING?
Crowdfunding is leveraging monetary contributions from a sizeable network of individuals in order to fund some type of project, or business venture. A successful campaign requires a collective effort from friends, family, customers and individual investors and utilizes online social media networks and crowdfunding platforms. This type of alternative financing has recently gained recognition as an impactful tool within the commercial real-estate industry.
Crowdfunding is a simple yet innovative idea that forms an environment where builders and investors can unite to create superior value for real estate endeavors. Value is established by providing builders and developers the opportunity to convey their concepts to a large, diverse audience of investors all over the world. The benefits of this situation, for both the developer and the investor, are mutually favorable. Developers can radically increase their likelihood of qualifying for financing, while investors have the ability to partake in, and benefit from, certain real estate projects they determine are the best investment option.
JOBS ACT
When the JOBS Act passed in 2012 the Federal Government deemed crowdfunding legal. Before the JOBS Act went into effect it was illegal to use general solicitation or publicity to market securities. In fact brokers would only market offerings to established clients who they had previously started a relationship. Crowdfunding has given real estate developers an avenue to extend past their current reach and use online resources to find capital for new projects bypassing some of the traditional financing drawbacks.
AN OLD IDEA WITH A NEW TWIST?
Crowdfunding might appear to be a new concept, but in actuality, it has been around and successfully utilized for centuries. Throughout history, companies have depended on their communities to support new developments and ideas. The difference today, is the emergence of social media and online platforms that facilitate connections between developers and large networks of educated individuals with interest in contributing. Numerous successful projects have been supported through crowdfunding, including the Hard Rock Hotel Palm Springs, Bogotá Art District, and the acquisition of the Empire State Building.
HOW HAS CROWDFUNDING AFFECTED THE REAL ESTATE INDUSTRY?
Just like all other industries, technology innovation has transformed the strategy used by real estate professionals to share ideas and perform business. Given the modern, easy to use, and readily available solutions at our disposal investors have the ability to explore, review, and invest in specific commodities and services that they have interest in.
Crowdfunding is an emerging business trend that has experienced remarkable growth during the last few years. Since 2012, international funding using online platforms exceeded an annual average growth rate of 75%. Consequently, a recent study from Massolution reports that crowdfunding investors injected $1 billion into the U.S. real estate market last year. By the end of 2015, that number should climb to above $2.5 billion.
CONCLUSION
Crowdfunding encourages the real estate industry to use the technology and resources available to diversify their ideas and provide individuals with the chance to securely invest in lucrative real estate opportunities. Crowdfunding also gives developers the ability to generate long-term value with their projects. Don’t let another day pass by without attempting to claim your share of the crowdfunding sphere. Each day $6,849,315 is invested in projects and ideas like yours!
Contact us today to learn how to claim your stake.