How Crowdfunding Is Changing The Face Of Commercial Real Estate

By Adam Chapnick,  CrowdFundBeat Guest Contributor, Chief Strategy Officer at AssetAvenue

The idea of crowdfunding isn’t particularly new. In fact, it may be one of the oldest concepts in civilization. Think of crowdfunding a little like taxes, where individuals pay into a large managed pot for use towards the common good of the collective group. While crowdfunding is voluntary and taxes are compulsory, the concept is at least simple to understand. .

Ny-wallpaper-490x306 (1)

Applying the practice of crowdfunding to a post-2012 JOBS Act world and you can see why crowfunding and peer-to-peer lending are taking in commercial real estate. The commercial property business model meets all the criteria of an industry ripe for disruption. It’s one of the oldest industries in the world, it’s run in a way that hasn’t been significantly updated or altered in a century and it’s bloated with fees and large players who are too big to adapt to shifting trends in technology.

It was only natural that commercial real estate would become the next big industry that needed disintermediation, similar to the way Uber tackled transportation and Airbnb shook up hospitality.

Here are three of the biggest ways crowdfunding is changing the face of commercial real estate.

1. Options

Basic supply and demand dictates that when there is market demand for something but not enough supply, an opportunity exists for someone to step in to fill the void. The demand for commercial real estate loans is steadily increasing, yet in a post-Great Recession financial world, traditional lending companies are less inclined to lend money and are moving at a glacial pace to deploy capital to borrowers still in need of funds. Faced with a slow, unresponsive market, borrowers are forced towards a small range of  lenders available to them. However with the emergence of crowdfunding platforms, borrowers suddenly have access to more options.

2. Access

Commercial real estate loans offer investors an opportunity to put their money into a fixed income vehicle backed by a hard asset. This is an asset class that the wealthy love and traditionally only a few select members of the investing world were able to access. With commercial real estate crowdfunding that access to fixed income assets is growing for the retail investor. While accreditation standards for individuals remain high, crowdfunding platforms are still able to offer these traditionally “small” investors more access to senior level deals because of the bulk and quality of deals their platforms are able to underwrite.

3. Savings

Old industries have outdated fee models are ripe for innovation. When industries remain unchallenged for decades and even centuries, massive inefficiencies build-up, creating higher overhead for financial institutions, who then have to pass those costs on to their clients in the form of higher and often confusing feed. As commercial real estate platforms scale, they’re able to leverage technology not only to reduce their own overhead but also to largely disintermediate the traditional chain of touch points in the lending process. Due to that reduced overhead and fewer unnecessary touch points, online crowdfunding platforms and peer-to-peer lending platforms are able to offer their investors unprecedented transparency and a significantly lower fee structure.

Despite its relatively new entrance into the commercial real estate industry, peer-to-peer lending platforms and crowdfunding platforms are poised to create a major disruption in the traditional financing and investing markets.

1c5afc5

Adam Chapnick
Chief Strategy Officer at AssetAvenue

assetavenue-logo

 

Tags: , , , , , , , ,

HEADLINE NEWS

FortuneUncensored Social Network Gab Raises $1 Million in Crowdfunding CampaignFortuneA crowdfunding campaign for Gab, a Twitter-like social network that touts its commitment to freedom of speech, surpassed $1 million yesterday. The company claims it is politically neutral and committ [...]

U.S. News & World ReportNo Cash for Hate, Say Mainstream Crowdfunding FirmsU.S. News & World ReportThe block on mainstream crowdfunding is just the latest blow to far-right activists operating online. In the last 24 hours, neo-Nazi website the Daily Stormer had its domain regi [...]

Baltimore SunHarford still opposes crowdfunding sites for school donationsBaltimore SunRaising money through online crowdfunding sites is an ideal way for teachers to find the funds to purchase classroom materials and should be restored, the head of the Harford County teachers' u [...]

FortuneDreamHost Sets Up Crowdfunding Page to Aid Trump Government FightFortuneThe Los Angeles-based web host DreamHost, which is fighting the Department of Justice over its attempt to seize records of visitors to an anti-Donald Trump website, has launched a crowdfunding campaign to a [...]

DualShockersBounty Battle Rolls out the White Carpet with Successful Crowdfunding CampaignDualShockersWhen we last checked in with the indie-obsessed fighting game, Bounty Battle, it was halfway through its $30,000 crowdfunding goal. Now with 3 days left to go, it's surpassed thi [...]

Crain's Cleveland Business'Smaller' gifts can go long way for Clinic's crowdfunding platformCrain's Cleveland BusinessFor an institution accustomed to securing multimillion-dollar donations, Cleveland Clinic's latest fundraising effort has some relatively [...]

GeekZing Smart Light Passes Crowdfunding Goal With Flying Colors ...GeekAt age 31, I still prefer to keep a light on in the hallway, illuminating my way to the bathroom in the middle of the night. (God forbid I step on the creeping cat—or ...and more » [...]

Business.comYou Oversold Your Crowdfunding Campaign – Now What?Business.comIf you've oversold, there's no way to go back in time and prevent it. Your next step should be to streamline what you can control. Crowdfunding can be an unpredictable, exciting experience. But reachi [...]

LITTLE GUIDANCE FROM IRS ON TAXING CROWDFUNDING CONTRIBUTIONSBloomberg BNAWhether it's a musician raising money to produce an album, an inventor with a great idea, or a family in distress that needs help, crowdfunding through platforms such as Indiegogo and Kickstarter has become [...]

ForbesWhat Works In Equity Crowdfunding -- Insights From ResearchForbesAs we have recently celebrated the fourth anniversary of the signing of the JOBS Act into law, it is a good time to take stock of the effect that the legislature had on equity crowdfunding in the United States. It [...]

CFB Finance

Marketwired

  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |