Real Estate Crowdfunding & Investing

At its core, crowdfunding means pooling money jointly from a group of traders to make an investment. On this sense, crowdfunding has existed in real estate for centuries. Neighbors have bought property jointly, husbands and wives and their sisters and brothers have collectively bought property and even multiple institutions have come together to collectively purchase property.

The major difference between collective real property investing of the past and crowdfunding for real property today is the ability to transact online and the unmatched access to offer flow by using the internet as the new distribution platform. Given the advances in modern technology, investors are now able to browse investments online, sign legal documents online securely, transfer funds, and have access to investor dashboards to watch how investments are performing. Instead of doing diligence on hundreds of real property transactions to find one to invest in, investors can search lists of pre-curated investments through crowdfunding companies.

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While the bankers business fund industry eagerly waits non-accredited crowdfunding consequently of Title III of the JOBS act, crowdfunding for real estate with certified traders has recently begun. This new way of real estate investing all starts with curated transactions and Realty Mogul reviews every transaction in-house. We also run background, criminal, and credit checks to gain comfort with the real estate investment companies and their management teams. While no crowdfunding company can guarantee the success of any investment, and risks do can be found certainly, creation is now a very important facet of crowdfunding and should lead to higher protection for investors.

At Realty Mogul, we only work with best-in-class operating companions who have a brief history and a track record of being successful in real estate. They are not hobbyists but rather, real estate specialists who’ve sometimes been in the business for years and years. After we find a best-in-class operating partner and a transaction that people are interested in, we setup a single purpose entity, such as a Limited Liability Company (LLC). This protects investors from any extra liability beyond their preliminary investment and it is not unusual in real estate today for companies to open up another LLC for each property they own or invest in.

Investors pool money into this LLC and by owning “shares” in the LLC, they are then entitled to reveal in the advantages of investing in the house. While equity investments enable investors to share in “upside” and cash flow from rents is typically distributed on a quarterly basis, loans allow the investor to receive a consistent, regular income stream with less volatility.

In both instances, communication about the property and the performance of the house is distributed on at least a quarterly basis and tax documents are provided to investors with an annual basis. Crowdfunding for real estate enables more investors to have access to pre-vetted real property investments that were historically unavailable outside of close-knit circles. It allows enables investors to write smaller check sizes also.