Sometimes there’s more than one way to buy into an investment.
Take gold, for example. Sure, you could buy physical gold bars or a gold mutual fund. But you could also invest in a gold mine!
It’s the same thing with equity crowdfunding. You could:
- Invest in the companies featured on crowdfunding platforms (i.e., buy individual bars of start-up “gold”); or
- Invest in the crowdfunding platform itself — i.e., invest in a “gold mine.”
It’s rare — as in, once in a blue moon — that you’ll see an opportunity to invest in a crowdfunding “gold mine.” But here’s the thing:
One of them is raising money right now.
A Platform for Crowdfunded Real Estate
is similar to other crowdfunding platforms we’ve written about — like AngelList
, or OurCrowd
— but instead of featuring early-stage companies that build things like medical devices or food products, they feature investment opportunities in Commercial Real Estate (“CRE”).
Historically, only the wealthy and well-connected could invest in commercial buildings in major markets like San Francisco and New York. But with the emergence of Real Estate Investment Trusts (REITs) in the 1960s, the doors to CRE were opened to all.
offers a new way to profit from this sector. Like REITs, their goal is to make it easy for individuals to invest in real estate. But unlike REITs, they risk no capital. If they can attract real estate deals and enough investors, they’ll make money.
Here’s how it works:
1. They leverage their relationships to source attractive real estate opportunities.
2. They perform due diligence, which they share with the RealCrowd community.
3. If an investor likes a deal, he or she can invest as little as $5,000. RealCrowd
makes money by charging transaction fees and ongoing management fees.
Every year, $250 billion of CRE changes hands. RealCrowd
is specifically focusing on real estate in the $2 million to $15 million range. This deal size is generally too small for institutional investors like publicly-traded REITs, but too big for most individual investors. That means less competition for good deals — and an opportunity for crowdfunding.
By creating an online platform and bringing together deals and individual investors, RealCrowd
allows real estate operators to raise money efficiently from a new source — and allows individuals to participate in CRE.
Does CRE Even Make Sense For Individual Investors?
makes it easier for people like us to write a check for CRE. But is that a good thing? Should this type of investment even be accessible to crowdfund investors?
CRE has a long history as an investment for institutions such as pension plans or endowments. Yale University’s endowment, for example, keeps more than 20% of its assets in CRE. But recently we learned that Yale’s Chief Investment Officer recommends that every investor, individuals included, do the same; that provides some comfort.
While CRE is unlikely to earn its investors Google-like returns (the search engine giant’s earliest investors made more than 3,000%), the fact that real estate is a tangible asset, and creates forecastable revenues and profits, means that it’s far less risky.
Buying Into a “Gold Mine”
So despite the risks — including competition from similar platforms like RealtyMogul
; the expense of attracting good deals and good investors; and the fact that this is a start-up, with all the risks that come along with it — our perspective is clear:
(Please note: Crowdability has no relationship and zero financial interest in RealCrowd.)