Why the Future of Real Estate Fundraising is Online
Since we began writing for The News Funnel earlier this year, we’ve spent a lot of time explaining the history of real estate crowdfunding and why we feel that it’s a unique opportunity for investors.
Today, I want to shift and outline the value proposition for real estate companies -- why a sponsor would benefit from raising capital through real estate crowdfunding.
The crowdsourcing of capital for real estate development projects is relatively new. The advent of online marketplaces, coupled with the passage of the Jumpstart Our Business Startups (JOBS) Act in 2012, has created tremendous opportunity to radically change the way entrepreneurs raise capital – starting in consumer products, venture capital, and now, real estate.
The JOBS Act relaxed securities regulations that previously restricted general solicitation of private placement investments, and equity crowdfunding, or the offering of equity- or debt-based securities to the crowd, has soared. In 2013, $2.2 billion in capital was raised via equity crowdfunding.
Among the key benefits of crowdfunding for real estate projects are:
- Access to cheaper, faster, and more flexible capital;
- Online management of investors and reporting;
- Amplified branding and marketing; and the
- Ability to tap into networks of thousands of individual investors.
Fundrise recently partnered with leading real estate news publication GlobeSt.com on a white paper that explores real estate crowdfunding, outlines its benefits, and shows how crowdsourced funding can fit into a project’s capital stack. Appendices include a guide for getting started with crowdfunding, and comparisons of typical terms for securing various types of capital (senior secured debt vs. mezzanine debt/preferred equity) via crowdfunding.
By: Dan Miller
Co-Founder | Fundrise
Follow Dan on Twitter: @dan_miller
Visit Fundrise's Website: www.fundrise.com
Visit the Fundrise blog: blog.fundrise.com
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