Crowdfunding’s Next Hot Frontier: Real Estate

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Crowdfunding has fundamentally disrupted the way that artists fund their creative projects and startups get capital to grow. Now, it’s changing the way buildings are purchased.

Real Estate CrowdFunding: why it’s a big deal

Investors are eagerly backing a variety of new real-estate crowdfunding platforms, all of which aim to bring greater transparency, efficiency and access to the industry. Last week, Beverly Hills, Calif.-based Realty Mogul announced a $9 million funding round led by Canaan Partners, the same venture capital firm that has invested in peer-to-peer lending platform Lending Club and dating site Match.com. In the same week, Palo Alto, Calif.-based RealCrowd said it secured $1.6 million in a seed round from investors at Y Combinator, the Data Collective and a mix of real-estate developers. And two weeks ago, Atlanta-based Groundfloor announced it raised $300,000 from American Underground, Bandwidth Labs and a couple of angel investors in the region.

For the real estate market, Internet-based transactions represent a huge innovation. Historically, for a real-estate deal to close, lawyers would have to FedEx documents back and forth, says David Drake, chairman of VictoriaGlobal.co, a communications platform specializing in institutional investing and crowdfinancing. Not only is that slow, but it can also add up to tens of thousands of dollars in legal fees. Crowdfunding online side steps all of that, Drake says.

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