Crowdfunding is an idea that has been gaining in popularity over the past decade as a way for people to come together and accomplish things. Although this may not seem like something that would relate well to real estate investing, commercial realtors and investors are demonstrating otherwise as crowdfunding commercial real estate beings to emerge. Commercial real estate brokers are seeing crowdfunding become lucrative, mostly successful ventures for investors looking at investing in real estate on a smaller scale or want to be involved in multiple projects.
How Crowdfunding Works
Crowdfunding is a way for multiple financiers to pool their money toward a main goal of gaining some type of reward once they reach that goal. This type of financial resourcing is done with investors contributing funds to one managed account or at a website that manages the funds. In return for that investment, they receive goods, services, or other rewards based on the amount of their contribution. This idea has been used successfully to launch businesses, create products, and in many other ways. Until recently, commercial realtors say it had not been used for real estate financing due to the regulations on crowdfunding.
Advancements in Crowdfunding
Before the JOBS Act of 2012 was passed, crowdfunding could not be used to generate investment income for real estate, as solicitation for real estate ventures was very regulated. Real estate investment fundraising efforts were restricted to pre-existing relationships. Openly advertising interests in these ventures was not possible, making it difficult to generate enough funds for these types of projects. Commercial real estate brokers explain that project planners can now publicly solicit investors. This has opened the door for crowdfunding as a means of generating investment capital that can eventually benefit all involved parties.
Crowdfunding and Commercial Real Estate
Commercial realtors are now finding that crowdfunding as a source of investment funds is growing in popularity for a number of reasons. A well-managed project that provides adequate transparency to its investors is a great opportunity for individuals to participate in commercial investments on a smaller scale. These projects are desirable to small and large investors alike, and the success rate for them has so far been very positive. Crowdfunding works similarly to REITs, but in a more public setting. Project managers can bring in thousands of investors on a single project, quickly raising required capital, and being able to move the project forward. Investors have access to many similar projects and can invest in as many as they wish. Through crowdfunding, investors usually have direct communication with other funders, all of whom play a more active role in the actual planning and maintenance of the investment.
Although a newer idea in commercial real estate, crowdfunding is offers investors amazing opportunities. Commercial real estate brokers have seen an increase in this type of investing since changes were brought about by the JOBS Act of 2012. As a result, many more people are getting involved in successful real estate investing. To learn more about commercial investment and help in finding good crowdfunding projects, investors should discuss their interests with experienced commercial realtors who can help them find the right investment projects!