From flying bicycles and Pi-shaped pie pans, to 3-D printers and home security systems, crowdfunding has seen its share of hits and misses. Flying in the face of traditional approaches to financing, will crowdfunding be on target when it comes to real estate trends?
What is crowdfunding?
Leveraging the accessibility of the internet and social media, crowdfunding offers a method of raising capital by providing access to tens of thousands of investors – from friends and family, to potential customers and individual investors. Contributions range from $20 to thousands, with payback encompassing rewards to cash returns on investment estimated in the 7-20 percent range.
How’s it work?
Typically, accredited investors can use the platform for free and “shop” for real estate opportunities ranging from single family homes to new developments and high-rises – nationwide. Money may be loaned at a specific interest rate, or as purchased equity in projects. iFunding, and rising star in the crowdfunding market, even offers a mobile app – purported to be the first ever in the real estate crowdfunding market.
Who’s crowding the crowdfunding market?
Linking real estate developers and investors, up-and-coming crowdfunding platforms elbowing their way into the market include iFunding, Realty Mogul, Patch of Land, Property Moose, Fundrise, Real Crowd and Realtyshares. There’s no beginning or end to the current market – there’s room for multiple leaders.
Can it work?
Jilliene Helman, founder and CEO of RealtyMogul.com, says crowdfunding is catching on, and on track to hit its mark along with other high-tech and community crowdfunding ventures. The sector raised over $1 billion in global real estate in 2014. By the end of this year, that figure is expected to nearly triple to over $2.5 billion. Realty Mogul alone has over 17,000 active institutional investors.
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