What is your experience using crowdfunding sites for real estate?

Question

Hi BP community, my name is Derek and I’m new to BiggerPockets and real estate investing. I currently work as a real estate agent in Los Angeles, California but I really want to explore real estate investing as it has always been an interest I’ve wanted to further. I’m particularly interested in small to large apartments, as my goal is to develop and help develop properties in the Greater Detroit Area (my home town). I am not opposed to learning about SFRs and commercial investing as well. I believe Detroit has great opportunity for growth, both financially and economically, and is definitely a market that needs the imaginative, large scale attention of investors other than that of just Dan Gilbert.

My question is, as a young investor with little capital, what are your opinions on using crowdfunding websites like “FundRise”, “Patch of Land”, “RealtyMogul”, etc.? Are communities like these legitimate areas to grow as an investor? What have been your experiences using communities like these? Are there any other directions you could recommend/ platforms you would focus on? I would appreciate any input you may have on the subject.

Thanks so much all, and I look forward to your feedback.

Brandon Romano · Answer

Hey Derek,

If you're interested, check out this blog post on Crowdfunding for Real Estate Investors. Have a good one!

Amy Wan · Answer

Derek,
It depends on what you're looking for (residential? commercial? debt? equity?) and whether or not you're an accredited investor. If not, you're limited largely to Reg A+ offerings (i.e. Fundrise). If you're accredited, the playing field is larger. You'll find that each platform tends to have its sweet spot in terms of asset class/deal type, though some trying to underwrite the entire spectrum of real estate. But at the end of the day, depends on what you're looking for.

Brandon Romano · Answer

@Michelle Ho You're welcome, and there are a ton of other articles related to real estate crowdfunding on the Brelion.com blog. You can make a free account and subscribe to email updates too.

Bryan Hancock · Answer

If you have little capital or experience you're probably not ready to raise money and be a good steward of funding from others.  You really need to apprentice somehow with other more experienced operators, developers, sponsors, etc.  The crowdfunding marketplaces aren't likely to work with you because you present too much risk.  So this really isn't a good use of your time in my opinion.

There are services springing up this year that allow investors to use SaaS technology to transform their existing site to their own site with their own branding.  You'd then be using your brand to work on building new capital sources over time.  That is probably a better option for you in my opinion.

David Thompson · Answer

I have not. I know Bryan Hancock BP member from the area that would be a good resource for opportunities in Austin. He started his own crowdfunding platform focused on Austin deals.

John Champagne · Answer

@David Thompson

David - have you been involved in any crowdfunding projects in Austin?

Michelle Ho · Answer

I am also learning about crowdfunding.

Thanks for the article Brandon.

Larry Fried · Answer

@Derek Anaeme Most of those crowdfunding sites you mentioned are tailored to accredited investors, which it doesn't sound like you are looking for.  I have invested in one site that I think is very unusual and it has a low entry point of just $10k. I really like what these folks are doing.  I blogged about it recently

Have I Found the Holy Grail of Passive Real Estate Investing?

David Thompson · Answer

Derek,

If you like apartments, hang around BPs apartment forums and put key word alerts in if you haven't already.  Watch podcasts on apartment investing (one this week came to mind) where sponsor is interviewed about his latest deal.  Crowdfunding has its place and Ian mentioned several positive things.  Large apartment investing is also done through private syndicated deals and knowing the sponsors, getting on their client list can connect w/them in BP.  If you spend enough time in the forums you will run across folks that you can get more information.  Being accredited is typically required but you can also join their newsletters to stay informed on latest in apartment investing education, trends and be privy to when deals come up to participate in if meet their requirements, etc.  Sponsors cannot post deals directly on BP, but you can identify several sponsors just by staying alert, then you can connect w/them.

Brandon Romano · Answer

Hey Derek, welcome to BP and the real estate investing world!Kudos on your ambition to invest in your hometown of Detroit. As you look into different crowd investment platforms, I'd also consider those that are focused more on specific markets such as Detroit or nearby Cleveland. Often times those platform teams have a deeper knowledge of their local markets, which enhances the quality of their due diligence and the info they can supply you about individual investments. Local knowledge is of course a huge asset in real estate investing.

What is your experience using crowdfunding sites for real estate?

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