Real Estate Crowdfunding presents itself as the first opportunity in quite some time that allows accredited individuals to invest in what has traditionally been an inaccessible market. Finding quality real estate fit for short-term investment is a challenge; gaining access to that real estate for personal investment is even harder.
The solution to this in the late 20th century was publicly-traded REITs. Today the transparency of real estate crowdfunding offers investors the opportunity to see exactly where their money is going. Investors can research and review properties and choose which are best suited for them to invest in.
Recently, these real estate crowdfunding platforms have been gaining much public attention from landing large institutional investments. While this is helpful for the health and development of these platforms, some individual investors may be wondering why institutional investors have access to the “crowd’s” platforms. Bisnow linked up with Sharestates to address just that. Why are big-time investors permitted to invest with the crowd, and if their investment dollars are allowed into the crowd, how much is too much?
Here’s an excerpt from the interview:
Bisnow: You guys hit $100M raised through your site, how long did that take, and how much of that was through institutional investors, instead of what we would think of as the traditional “crowd?”
Allen Shayanfekr: That’s was mostly over the last 12 months, since our launch in February. It was about 80% institutional, 20% individual. When we originally set out to launch this platform we were of course targeting individual investors, and they still are very much our focus. But we realized that in order to make sure the company was healthy and going to be around for the long haul to eventually catch those individual investors, we needed to be able to drive volume. So we did end up bringing these institutions on board. But more than that it brought a lot of legitimacy to our platform to have these institutions on board with us.
Bisnow: How so?
Allen Shayanfekr: It actually made our individual investors feel more at ease knowing that they’re investing side-by-side in the same deals as these big institutions. Rather than parsing it out and having a separate database of loans, or having our institutions in a separate database, we’re funneling both the individuals and institutions into the same projects.
Bisnow: If you’re taking on so much funding from institutional investors, what separates you from being just an online hedge or private equity fund?
Allen Shayanfekr: Well, the goal is eventually for us to lower the ratio—we want our individual investor base to be the majority of the platform. But, being a startup, there’s multiple roadblocks you’re going to hit. For us, in order to target that individual investor base, it’s really about marketing and advertising the brand out in front of people and making them feel comfortable—and we need the funding to do that.
Read the full interview at Bisnow.com
How do you feel about individuals investing alongside institutional investors? Join the conversation by commenting below, we would love to hear from you.