Real estate offers crowdfunders real incentives

Property market the hottest sector for newfangled financing model

TRD New York /
Jun.June 12, 2014 03:00 PM

Real estate might not have the glam appeal of movies. But within the buzz-driven world of crowdfunding, the real estate market is emerging as an unlikely star.

Offering backers real incentives and returns on their investments, the property market has become an increasingly popular outlet for crowdfunders. Richard Swart, who runs the crowdfunding research program at the University of California at Berkeley, said that real estate is now crowdfunding’s hottest sector.

“It’s getting the most interest and the most activity,” Swart told the Wall Street Journal.

As opposed to creative projects, which might offer investors trinkets as premiums, real estate project starters can offer the prospect of real returns to investors. And while technology startups can be too obscure for the taste of some investors, properties provide tangible assets that people can see and visit.

Though crowdfunding is still a relatively unexplored and under-researched area due to its novelty, Crowdnetic, a firm that tracks data pertaining to crowdfunding, concluded that real estate is the leading category within the field, the Journal reported.

Meanwhile, crowdfunding sites are seizing the opportunity to tap into that growth. EarlyShares.com, an online equity crowdfunding site, recently partnered with Property.com in an effort to expand its real-estate sector. And Fundrise, which claims New York City as its biggest market, received more than $31 million in its first substantial capital raising earlier this year.

However, loose regulations within the crowdfunding world have drawn skepticism over the solvency of such investments. Landlords and developers might turn to crowdfunding because they have failed to acquire financing from banks or other traditional sources, while investors might lack the breadth of knowledge necessary to scrutinize potential investments, according to the Journal.

Still, many real estate fundraisers see great potential in the alternative financing source, and some have estimated that projects could soon climb into the multi-million dollar range. [WSJ]Sasha von Oldershausen


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