Crowd investing real estate

Real Estate CrowdFunding: why it’s a big deal

SAN FRANCISCO- Intersection of Real Estate and Technology has emerged as a leading space for startups and established companies alike and a new wave of Real Estate Technology (or RealTech for short) companies are beginning to disrupt the real estate market at a rapid pace. These companies are infiltrating every corner of the real estate industry, from simplifying the transaction management process and making it completely paperless to crowdfunding real estate investment deals.

It isn’t surprising that these companies (ranging from established behemoths to early stage startups) are so keen on disrupting Real Estate. For one thing, it is a huge and existing market. As of 2012, the U.S. commercial real estate market had a market cap of $11 Trillion and more than $350 Billion worth of real estate traded hands. And real estate has been slow to adapt to technology. Little has changed in the way real estate is bought, listed, viewed, purchased, sold and managed in the last 10 years. However, with the recent IPO’s for Zillow and Trulia and Loopnet’s $860 Million exit to CoStar Group, Founders see a real opportunity to add value to this sector and become rich along the way.

Recently, I had the pleasure of attending an event here in San Francisco focused on the intersection of Real Estate & Technology. The event, called CRE Tech Intersect, was sponsored by big name shops such as CBRE, Trinity Ventures and Rockefeller Development Group and showcased some of today’s most exciting commercial real estate technology firms. Among the firms showcasing and demoing at the event were such recognizable names such as 42Floors (online marketplace for office space), Compstak (Crowdsourcing for Commercial Lease Comps) and Storefront (Marketplace for short term retail space). However, despite an abundance of hot new real estate technology startups demoing their creative and cool new products at CRE Tech Intersect, two emerged as my favorite. The startups, RealCircle and Fundrise, are both focused on what I think will be the greatest innovation in Real Estate since the Real Estate Investment Trust (or REIT for short)—Crowdfunding for Real Estate.

Over the past year, crowdfunding has emerged as a multi-billion dollar industry and “investment crowdfunding” has begun to revolutionize the way individual investors invest. And with platforms like Circleup, Fundersclub and Mosaic already gaining traction, investment crowdfunding is expected to drive everything from startups, consumer goods and even alternative energy. But its application to real estate investing through platforms like Fundrise and RealCircle, will be its most disruptive application.

Fundrise, a D.C. based startup, is focused exclusively on local real estate development opportunities (which can be very risky) and is open to any investor regardless of net worth or annual income (although all investors must live in the D.C. Area). RealtyShares, a San Francisco based startup, is focused on opportunities that are nationwide and investors can be from anywhere. However, all investors must be accredited. An accredited investor is anyone making at least $200,000 (or $300,000 jointly with that persons spouse) or having a net worth of atleast $1 Million (excluding your personal residence).

However, despite their differing approaches to Crowdfunding, both platforms are lowering the barriers to entry for investors and thereby providing investors with greater access to real estate. Additionally, by utilizing technology and focusing on transparency and efficiency, these platforms are also turning a once clunky process into a simple, streamlined and paperless one.

Accordingly, we are in the midst of a very powerful transition in the RealTech space and Crowdfunding for Real Estate will emerge as the innovation to watch. I for one am very excited to see what the future holds for platforms like Fundrise and RealCircle.


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