The advent of real estate crowdfunding and the rollout of the Jumpstart Our Business Startups (JOBS) Act has the potential to open up billions of dollars for investment from Americans who’ve never had a chance to participate in development before.
By leveraging technology, cutting out unnecessary middlemen, and expanding access, real estate crowdfunding allows for a simple and efficient fundraising process.
We started Fundrise four years ago with the goal of opening up the real estate industry and connecting investors and developers.
We receive thousands of inquiries from sponsors interested in using crowdfunding to raise capital. So, we created a list of tips for anyone considering raising capital through real estate crowdfunding—and some of the key questions to ask:
2) Make sure your product fits squarely within a platform’s parameters. For example, it’s important to understand if a platform is focused on ground-up, value-add, or stabilized assets.
3) Learn about the different regulations used. While all platforms “crowdfund real estate investment”, not every platform opens investment opportunities to the general public.
- Public Offerings - Anyone can invest under Regulation A, but it can be a lengthy, costly process.
- Private Placements - The raising of funds solely from accredited investors through Regulation D.
4) Understand what kind of fundraising a platform might do. Is it Best Efforts Crowdfunding, meaning that a sponsor receives whatever funds are raised on the platform during the length of the raise? Or is there a Fund, where a sponsor will fund the investment in its entirety and then open it up to investors at a later date? Or, rather, do they act as a Posting Platform, without performing due diligence on deals or handling investor relations?
5) Have a deal in mind that you’re actively raising for. Platforms appreciate when you have a deal ready to go and the process will go faster, as a result.
6) Remember, this isn’t free money and it doesn’t come without due diligence. Legal support will be needed on both the sponsor and platform side will need to be involved.
We hope these few tips will position you for a smoother onboarding process if you do decide to move forward with a raise. It’s been very exciting to watch the real estate crowdfunding space grow and we look forward to being a part of its continued expansion as it shifts from an alternative strategy to one used by all individual real estate investors.
Feel free to reach out to our team at email@example.com if you’re interested in learning more about Fundrise as a financing option.
Image Source: 401(K) 2012