With $1 Billion Invested And $100 Entry Points, Real Estate Crowdfunding Grows Up

Vanessa Grout – Forbes Contributor March 24, 2015

In September, I wrote an article about the latest crowdfunding trend: real estate. At the time, the Hard Rock Hotel in Palm Springs was receiving attention for crowdfunding a 15% equity stake for $1.5 million. While this was great press for the hotel, it also advanced the public perception of an investment strategy that appears to be real and lasting.

A recent study from Massolution reports that crowdfunding investors injected $1 billion into the U.S. real estate market last year. By the end of 2015, that number should climb to $2.5 billion. Advances like $100 investments, debt participation and availability to foreigners are contributing to this projected surge.

“It’s growing beyond expectations,” says Richard Swart, Massolution’s research adviser on the report. “When the JOBS Act passed we didn’t think real estate would be a part of it, but it turns out to be a more efficient way for investors to find good deals across the spectrum.”

Now is it time for you to jump in?

For accredited investors who like the idea of pooling small sums to purchase large properties, crowdfunding is an excellent way to get into the game. “The excitement for us is giving everyone access to investing in commercial real estate,” says Dan Miller, co-founder and president of Fundrise, one of the original real estate crowdfunding platforms, which now has 41,000 users.

The crowdfunding concept is not exactly new. REITs — formed decades ago — allow investors to combine resources to access a large and diversified portfolio of properties. Today, technology fast-tracks this process with engaging and highly supportive websites to help investors evaluate the merits of each offering.

If you’ve never looked into real estate crowdfunding, here’s how it works: Once you’re confirmed as an accredited investor (with a net worth of at least $1 million, excluding your home, and an income of $200,000 for each of the last two years), you can browse open investments on the platform of your choice.