Crowdfunding and Commercial Real Estate
How much have you heard about crowdfunding and commercial real estate? If you aren’t familiar with it, here’s our overview of the advantages and disadvantages for not only raising money but also investing via crowdfunding platforms.
You’ve probably heard of various crowdfunding initiatives, like for example, when it comes to medical expenses. Families who are unable to afford medical costs may ask for donations from friends, family, and even strangers to cover their expenses. It’s also popular for to raise money for new ideas and inventions via crowdfunding websites like Kickstarter & Indiegogo. If someone has an idea or wants to manufacture a new product but they don’t have the starting capital, they may find people who want to purchase the product in the future and give them incentives in turn for helping fund the startup.
Crowdfunding and Commercial Real Estate
Real estate crowdfunding is a bit different. Instead of donating money, people are investing their money with a good potential for outsized returns and tax advantages. It’s a way of investing in private market real estate transactions at low minimums and with reduced volatility. With crowdfunding, small investors can own a piece of a property and add to their portfolio without adding landlord to their list of duties. And, borrowers can quickly get funded for commercial real estate projects without even having to qualify for a bank loan.
Advantages of Crowdfunding in Commercial Real Estate
Crowdfunding is a win-win situation whether you’re seeking financing or wanting to invest. With crowdfunding, large commercial projects get funded and small private investors get to diversify their portfolios even if they can’t afford to invest enormous sums. It’s great for borrowers who wouldn’t otherwise qualify for traditional financing.
The future seems bright for crowdfunding in commercial real estate, especially with the current healthy state of the real estate market and platforms like CrowdStreet that allow you to easily invest in commercial real estate. Even institutional real estate companies are starting to use crowdfunding to finance projects, which gives the practice some added legitimacy.
Disadvantages of Crowdfunding in Commercial Real Estate
If you are seeking financing, problems can occur if you don’t work with a reputable platform that understands your needs. Choose a platform that is experienced at marketing, pre-vetting, underwriting, tax reporting, communicating with investors, and more, that way, you won’t have to do as much legwork and you can focus on finding your next great real estate deal!
If you’re an investor thinking about getting into crowdfunding, it’s not too different from many other forms of investing: all investments have a risk, and some are riskier than others. If you are thinking about becoming part of a crowdfunding project, it’s important to weigh the advantages and disadvantages of each specific investment that you’re considering. Consult with your financial advisor or one of MarketSpace Capital’s analysts to see what’s in your best interest, whether it’s a high-risk/high-return investment or something a bit more secure. Contact MarketSpace Capital today by giving us a call or sending an email to firstname.lastname@example.org
MarketSpace Capital, LLC is a Houston, Texas-based private equity real estate development firm focused on ground up developments and value-add investments throughout the United States.
Disclaimer: *For sold properties, actual sales price is reported. For active investments, the Estimated Current Value is based on the Managing Member’s estimate of current value. Recent acquisitions are generally valued at the acquisition price. Values may be internally prepared. This web-page/website is for informational purposes only and is qualified in its entirety by reference to the Confidential Private Placement Memorandum (as modified or supplemented from time to time, the “Memorandum”) of any offering of MarketSpace Capital.