If you’ve been keeping an eye on the real estate crowdfunding market, you already know how many exciting things have transpired in such a short period of time. The market is due to turnover $2.5billion in 2015. However, you may still be waiting on the sidelines to see how things pan out. This wouldn’t be the first time a new industry showed promise before buckling. Fortunately, there are at least five other big reasons to believe in this brand new market.
Washington Does
Just because politicians think something will work doesn’t necessarily mean it will. You don’t have to be a history buff or even have a particularly good memory to know that much. However, when Washington doesn’t like something, it generally doesn’t get very far.
Real estate crowdfunding will not have this problem. It’s already on its way to being heavily regulated, which is the government’s way of giving it their stamp of approval.
We’re still a long ways away from small-time investors in Minnesota being able to put money into real estate deals in Oregon without the help of an accredited investor. Still, the JOBs Act has very precise language addressing this type of opportunity specifically. Now, it’s just a matter of time.
100s of Platforms Are out There
Alright, so it’s not 100s quite yet, but it’s getting there. At last count, the world was home to some 150 crowdfunding real estate platforms with more on the way. There is a huge secondary market to be enjoyed thanks to this new investment opportunity and a lot of jobs are getting created because of it.
Obviously, this is bringing in some serious investors. Curiously, some companies are also using crowdfunding to get the money they need.
There are a couple of important takeaways from this. First, the barrier to entry to getting involved with real estate crowdfunding is becoming lower and lower. People who want to get started have no lack of opportunities and can easily cater to their particular needs.
This flush market also shows that politicians aren’t the only ones who see a future in real estate crowdfunding. People with a lot of money, who are very careful about where it goes, know that a solid opportunity has arrived.
Silicon Valley Has Taken Notice
Speaking of which, Silicon Valley is on its way to making the most out of this opportunity. Of course, many from the world’s biggest technology hub have already shown up, but you can expect 2015 to close out with a lot more startups and Silicon Valley companies putting money into real estate crowdfunding.
Such a development is a big shot in the arm for this new industry for a couple of reasons. First, more investors are only going to help. Second, more platforms aren’t a bad thing either (though, obviously, we’re still going to see some start losing out to competitors). Third, Silicon Valley loves nothing more than disrupting markets. While real estate crowdfunding has definitely already done that to a large degree, wait until 2016. We’re about to see what happens when experts in automation, streamlining and social media marketing take an already promising field and inject it with their talents. Soon enough, things like credit underwriting will be completely automated. The timeline for credit underwriting will be cut down even further.
That’s just one example too. There’s no telling where the future lies now that Silicon Valley is here.
Traditional Banking Isn’t Looking So Great
Even with the help of Silicon Valley’s best and brightest, traditional banking isn’t going anywhere anytime soon. That being said, it’s not as though people are necessarily looking for opportunities to work with traditional banks either. Obviously, real estate crowdfunding is here because so many people want to become investors. However, it has just as much to do with the fact that those who need money don’t necessarily want to go through traditional routes anymore.
Recently, Goldman Sachs predicted as much. According to them, the banking industry could be losing as much as 7% of its annual profits over the next five years. That’s no small piece of the pie either. We’re talking about some $11 billion.
The culprit isn’t just real estate crowdfunding companies, but other fintech startups just leaving their gestation periods. That being said, this new form of real estate is definitely playing a role too.
It’s hard to imagine how traditional banks could possibly fight back at this point. Consumer confidence is probably at a 40-year low and now these exciting new opportunities are popping up everywhere.
Investors Want More Control
Along the same lines, investors are tired of the old way of doing things: you give your money to a trader or some other financial professional and hope for the best. While you can generally withdraw your money when necessary, you’re otherwise watching from a distance.
Real estate crowdfunding can put investors in control like never before. Small-time investors and those just getting started actually have some say over where their money is going, specifically, and how it’s getting spent.
Obviously, this means a lot of people are going to make mistakes. However, a lot of traders are also going to realize that they need to take steps toward learning the ropes ASAP. This is something a lot of us haven’t had to do in the past, but actually understanding how our money is being used is probably a good thing.
Consider, too, that this isn’t just about making sure profits are maximized. A lot of people love this facet of real estate crowdfunding because it means they can exert that influence to help out their local communities. Countless cities across the country are still hurting from the recession. The solution may be local investment whereby various commercial and residential properties get the money they need and members of the community have a vested interested in seeing both do well.
Now is the time to strike while the iron is hot. While there will be plenty of more opportunities to enjoy what real estate crowdfunding has to offer, the five reasons above should show you that you’ll be kicking yourself if you wait much longer.
Matthew Sullivan
@thecrowdventure
