RE investment via crowdfunding “irreversible trend”: OPINION

Diversification, hedged risk are among investor benefits
February 28, 2014 03:15PM

Crowdfunding, the latest investment trend in U.S. real estate projects, is poised to unseat traditional banks and investment players, according to Forbes columnist and private equity adviser David Drake.

That’s because investors in real estate through crowdfunding can more readily diversify their investments and lessen risk, as compared with those that invest through larger funds, since they are based on individually-selected projects rather than, say, an entire real estate company.

“If one project or one company fails, other companies may fill the gap,” Drake writes.

For the biggest success stories so far, Drake points to Times Realty News’ roundup of the top 25 real estate crowdfunding firms, led by 17 John Street “cotel” developer Prodigy Network, and Fundrise, whose projects include an apartment building at 151 Dupont Street in Greenpoint and a boutique hotel in Gowanus.

If all goes well with real estate crowdfunding, Drake divines, the rise of crowdfunding will then likely spread to other industries as well, particularly to technology-driven projects.

“With the rules and restrictions that banks and investment houses must adhere to, they will encounter difficulty in matching the flexibility of crowdfunding in terms of the amount of placement, choice of timeline and returns and speed in transaction processing,” Drake writes. [Forbes]Julie Strickland