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Current Trends in Real Estate Crowdfunding

Real estate crowdfunding may be relatively new, but it’s evolving quickly. At the very moment, there are some amazing trends worth pointing out because they show just how far this industry has come in such a short period of time.

More Platforms Will Show Up

At the moment, we’re already looking at roughly 150 platforms servicing the world of real estate crowdfunding investors. That number is only going to go up too. Though the market has taken some early adopters out of the game, we’re still a long, long way from seeing the ceiling.

Keep in mind what further regulation will do as well. That’s still a long ways off. There are plenty of people—both investors and those who can make platforms—waiting in the wings to see how the JOBs Act will play out. As soon as the ink is dry on that, more investors will dive into the market and more platforms will be necessary to satisfy them.

What that also means is that we are probably going to see a lot more diversity in the market too, in terms of how these platforms will operate. This will make for a dynamic industry where even more platforms will lose out to those that brought better innovation to the table. It should be interesting, to say the least.

The Technology Is Getting Better

One thing that real estate crowdfunding had going for it from the beginning is digital infrastructure. While this industry is new, crowdfunding definitely isn’t. That being said, it’s not as though you can use the same technology for funding a $1,000 album that you need for a $200,000 house.

The good news is that we’re seeing the technology catch up, something we touched on above. It helps that Rule 506(c) was changed so that the longstanding policy of the SEC’s made it possible for broad public solicitation to take place (though only accredited investors can make the investments). This means a lot of programmers are very busy right now creating better software for helping investors get in the game.

Old Names Will Get Involved

A lot of people see real estate crowdfunding as this complete market disruptor, which it’s easy to argue is exactly what it is. In fact, many claim it’s the biggest revolution in real estate in our lifetime and possibly ever.

Nonetheless, that doesn’t mean this is an industry made up completely of mavericks. Although it may have taken them a while, another trend we’re seeing at the moment is some old names in the industry coming around to the idea that crowdfunding not only works, but could work for their aims as well.

Consider, for example, that the IMN US Real Estate Opportunity and Private Fund Investing Forum that was held recently featured a session on real estate crowdfunding. The event was extremely well-attended by industry veterans.

There was also a seminar in San Francisco put on by Dechert and CRE Financial recently that was completely dedicated to this new industry. Again, a lot of eyes in the audience belonged to well-respected names in real estate.

Regulation Is on the Way

While the industry is definitely regulated right now, there’s a long way to go and we’re currently seeing progress in that direction. As we mentioned above, the conclusion to the JOBs Act is still on the horizon. There are also plenty of states that need to figure out how they’ll treat this new type of investing.

It’s amazing that we’re seeing this come to fruition right before our very eyes. There is still plenty more oversights to come, no doubt, but it’s also happening right this instant, which is actually very exciting. The sooner politicians understand and support real estate crowdfunding, the sooner the economy and investors can benefit.

The Little Guy Isn’t Going Anywhere

If you’ve been paying attention, it’s been pretty amazing to essentially watch a brand new industry come of age so quickly. Amongst other things, this has meant that real estate crowdfunding is beginning to become a market with some very clear roles.

You’ll definitely see large investors take advantage of this new world. Remember those big names we mentioned that are attending seminars already? Silicon Valley is getting involved too.

With all this big money making its way over, you might think that those of us without those war chests would be getting edged out soon.

Interestingly, though, the little guy may always have a home in this industry. A lot of the deals that are being made in real estate crowdfunding are probably only possible with a large number of smaller investors.

These parties can do two things extremely well. First, they can take on investments that are just too small for their much larger counterparts. Smaller enterprises may soon stop bothering with the titans and go right for the tots every time.

The other thing the little guys bring to the table is sheer speed. It’s now typical to hear about loans getting closed in just a few days without a problem and equity investments being completed in as little as 5 days.

Neighborhoods Are Getting Rebuilt

Obviously, the main reason this new industry is so exciting is because so many of us are now able to make money from real estate, where, traditionally, we wouldn’t be allowed at the table.

However, it’s worth mentioning that a lot of people are using real estate crowdfunding to help clean up the mess left over from the economic downturn we just got through. Cities like Chicago may start getting rebuilt, not because of politicians or big banks, but because regular people are putting their money into it.

If residents of the neighborhoods are able to put skin in the game, there’s every reason to think that they change they affect could be permanent. Investors would have one more reason to look after their communities.

The current trends in real estate crowdfunding are just one more reason to be excited about what the future holds. There will be a lot more to look forward to in the next decade or so.

Matthew Sullivan


Images by Shutterstock

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