I’ve watched as the real estate crowdfunding website Fundrise has originated more than $200 million in both debt and equity real estate investments.
If you’re an entrepreneur, you’re looking at a window of opportunity.
The real estate crowdfunding industry is BOOMING. I promise you that many millionaires are going to be made in the next few years. The way that real estate is financed is completely changing.
Now is the time to get on the real estate crowdfunding business!
Since writing the book, Real Estate Crowdfunding Explained, I’ve been asked time and time again by my readers to outline how to start an actual business in this industry.
If you want to start a website, platform, or profit from real estate crowdfunding in any way, then you’re going to want to read every word of this article.
1. Decide on What You’re Selling!
There are many financial products that are offered within the context of real estate crowdfunding. Some of these could include:
- Equity financing (preferred equity, equity)
- Debt securities (traditional loans, hard money lending, p2p lending)
- Private, non-traded REITs (Regulation A+)
These are the types of investments that your users will have access to on your platform. It’s important to look into the legal and reporting requirements for each of these different financial products.
Once you’ve decide on the types of investments you’ll be offering on the website, you also have to choose the category real estate you’ll offer. This could include:
- Commercial
- Residential
- Fix and Flip
- New development
- Raw land
You may choose to specialize even further and focus on a specific region of the country to get started.
2. Get the Right Technology in Place…
Aside from the legal requirements, I think that the most daunting part of setting up a real estate crowdfunding business is the technology a3. spect.
First of all, you could hire a web development agency to create the technology for you. You’re going to need significant funding to afford to fund the creation of the platform. Likely, there will also be some kind of on-going maintenance fee as well.
Next, you could hire a bunch of programmers to work for you and create the website. This will test your project management skills. You’re going to have to expand your team eventually, so you’ll go through this step at one point or another.
Lastly, you could try to “test out” the concept of a real estate crowdfunding website by using a white label service provider. This will probably be your cheapest option.
You can use a website like GroundBreaker to accomplish this.
GroundBreaker lets you do a private placement offer to a group of investors on your own website. You can also use the software to set up a “crowdfunding” offering via Regulation A+, Title III, Intrastate, etc.
Personally, I think that this white label software is a great way to get started in the business. It helps with a lot of the nitty gritty, like accreditation, compliance, and investor reporting.
3. Build Up Your Investor List
You can’t just expect people to discover your website on their own. You gotta invest in sales and marketing!
Start building up your network and list of investors ASAP. You will tap into this network when you’re trying to actually fund a real estate project.
The determining factor of the success with real estate crowdfunding will come down to:
- The quality of investment opportunities you have available.
- The strength of your investor marketplace.
It’s not going to be the technology side of your platform. This is turning into a commodity, as you’ve seen with the white label software.
At the end of the day, a platform is a marketplace of investors and sponsors. You need to do everything in your power to build a thriving marketplace.
I’ve made a career out of figuring out how to get traffic to a website and convert website visitors into customers. Simply put, I know how to get quality attention online.
These are some of the strategies that I recommend looking into:
- Creating lead magnets
- Guest posting
- Going on podcasts
- Starting an affiliate program
- Ongoing email marketing
- Doing Facebook and Google ads
- Content marketing (educational resources)
4. Secure Funding For Your Venture
The last part of starting a business in the real estate crowdfunding industry is to secure funding for your startup.
Yes, you can set up a real estate crowdfunding page ONLY for your investors.
However, if you want to expand beyond that and you want to start a platform where users can raise capital for their real estate opportunity, then you’re going to want to look into getting financing for your business.
I’m talking about starting with angel investors and progressing on to venture capital funding. This industry requires that you are well capitalized if you want to chase the big bucks.
Most of the major platforms in this industry have raised venture capital dollars. If you want to compete long-term, then you’re going to have to as well.
Of course, there are many ways to get funding for your startup, which I’ve discussed here.
Know Your Business and Industry
You have to double down and become a master of this niche. Consume as much content out there as possible on the topic of real estate crowdfunding.
As I mentioned before, I’ve written a comprehensive book on this called, Real Estate Crowdfunding Explained.
You can also look into the archives of my website or just go to the website that accompanies the book.
I hope you find this article to be helpful!
