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 real estate development before.
By leveraging technology, cutting out unnecessary middlemen, and expanding accessibility, 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 questions from real estate companies interested in using crowdfunding to raise capital. So, we created a list of tips for anyone considering fundraising via equity crowdfunding—and some of the questions to ask:
1) Find out what the platforms you’re considering are looking for. Equity? Debt? Both? What sort of returns? What sort of risk? This will save you time down the line.
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 equity 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 contact@fundrise.com if you’re interested in learning more about Fundrise as a financing option.
About Fundrise
Fundrise is the leading real estate crowdfunding platform. Founded in 2010 by developers and brothers Ben Miller and Dan Miller, Fundrise was the first site to successfully crowdfund an online equity offering for a real estate property. Based in Washington, D.C. with offices in New York and San Francisco, Fundrise has brought real estate to the mainstream, raising more capital in a first-round Series A than any other equity crowdfunding company.
With these investments from established players including Renren Inc. (NYSE: RENN), Silverstein Properties CEO Marty Burger and Guggenheim Partners, Fundrise is bringing world-class real estate investments to small-scale, high net worth, and institutional investors throughout the United States. The company also gives local residents the tools to build the cities they want to live in by investing in real estate projects, opening up new possibilities for economic growth and urban development. For more information on Fundrise, visit here.
