Crowdfunding Down Payment

[Todd G.]

Has anyone used crowdfunding to fund some or all of their down payment? If so who did you use and what where your terms? Would you advice others to use them or use crowdfunding in general? What are some of the lessons learned through it? Thanks in advance.

[Don Konipol]

@Todd G., the major real estate equity crowdfunding sites require the sponsor of the project financed to be (1) experienced in sponsoring, owning and operating projects of the type being proposed, with (2) a verifiable track record of success and (3) a corporate net worth in the low 8 digits, or more, and finally (4) having put up the earnest money, legal fee cost, and any due diligence fee out o their own pocket.  This is not something available to the individual investor.

Debt crowdfunding sites operate more like private lenders, except that they will either crowd source or syndicate the loan.  They require the borrower to make a 20-30% down payment, have a clean credit history, and depending on the site may require a degree of experience in the property type.

Now, there are some sites that do not have these requirements and let just about anyone use their site in an attempt to raise capital, but these sites require the sponsor to pay a "listing fee" to post, and a "success fee" if capital is successfully raised.  

Raising capital through equity crowdfunding also results in the sponsor giving up the majority of ownership in the property, as well as a preferred return to the money investors.  

Finally the sponsor of deal he is trying to raise equity capital for will be responsible for the legal costs o complying with REG D 504 b or c, minimum cost about $16,000.00 plus filing fees.

Not exactly the "Holy Grail" small investors may be looking for.