The evolution of financial technology (fintech) has created new opportunities in the real estate investment field to enable those with venture capital, and viable real estate development projects, to collaborate seamlessly. There has always been a historical gap between those that had money, and those that needed it. It traditionally required extensive networking and ample marketing budgets to generate suitable investment opportunities on both sides of the deal-flow and financing equation. Online real estate investment technology has bridged this barrier.
How can you as a project representative, accredited investor, or real estate professional harness this technology to advance the strategic objectives of all stakeholders in the real estate economy? We’ll explore how online real estate investment technology can bring you more potential for growth in your real estate investment career.
Online Real Estate Investment and Reduced Risk for Accredited Investors
The driver behind the evolution of real estate investment technology is the appeal of the crowdfunding model. While crowd sourcing of funds for investment projects is centuries, and even millenniums old, the nature of the instant communications afforded by the development of the Internet has allowed more efficient collaboration between the various stakeholders involved in the real estate invest business.
Advancement of data collection, storage, and analysis technologies has equipped the industry to make more informed, quality decisions in less time. The global nature of digital communications technologies allows investment project leaders, accredited real estate investors, valuation professionals, and financiers to share and extrapolate sophisticated data sets to create the most refined and accurate financial projections possible at any point since the inception of finance.
Analytically advanced technology and instant, interregional communications capability creates an environment that reduces risk for all parties through superior data, and combined experience and fiscal power. Risk is among the key factors that influence all aspects of the investment business and financial decisions. One of the greatest benefits of crowdfunding for real estate investments is that stakeholders can distribute the risk across multiple contributors and properties in a broader portfolio of shared real estate investments.
Stable Returns Through Pooled Funding Opportunities
Investing in real estate investment projects through shared risk funding models allows more stable returns. By offering pre-vetted real estate investment projects that have passed through rigorous due diligence standards, pooled funding allows the accredited investor to be certain of the viability of proposed projects. Value add projects, that are acquired below market, and managed by credible and experienced project leaders offer the least risk and the highest profit margins, the benefits of which are passed directly to equity and debt investors.
Smaller contribution requirements allow you to spread your capital over multiple projects, further diminishing the overall risk profile of your portfolio. Inevitably, a small percentage of projects in any investment medium are bound to fail; however, with your investments allocated among several baskets, the investor stands to lose less if a borrower defaults, or markets collapse. If an investment does have a less than positive outcome, the team that administers the crowd funded investment will handle the recovery autonomously. Crowd sourced investments carry the additional advantage of minimal management responsibility, freeing the accredited investor to focus on identifying new opportunities.
Greater Access to Real Estate Investment Capital
For real estate entrepreneurs seeking access to significant amounts of capital to realize profitable development opportunities, online real estate investing technology provides an extremely well capitalized marketplace to source funds. Traditionally, the greatest challenge in real estate investment was raising the capital to fund projects; however, that has now shifted in the opposite direction: acquiring profitable opportunities has become the greater challenge, with capital readily available for viable proposals through the global network of real estate venture capital.
Regardless of the class of property you need to fund, or the scope of the project, there is capital available for ventures that are led by experienced and credible professionals. The cumulative experience of the online real estate investment platform’s team of dedicated and diligent investment and finance professionals provide the additional support to insure the solvency and long-term viability of sponsored projects. The crowdfunding marketplace has the additional benefit of stimulating competition among private money sources, thereby reducing the overall cost of capital, even for projects that would historically be deemed as representing greater risk, demanding an excessive cap rate.
The contemporary field of real estate investment has created new opportunities for all participants in the industry. While the array of options presented by the modern investment landscape can be overwhelming, working with reputable and experienced investment professionals will provide the guidance needed to identify and embrace qualified real estate investment opportunities and capital sources. The evolution of the real estate market and supporting technology promise a more diversified and safer investment environment.
Investopedia defines FinTech as a “portmanteau of financial technology that describes an emerging financial services sector in the 21st century.” In other words, FinTech is the use of technology to support electronic banking and financial services. With the ongoing increase in the use of technology, FinTech is a crucial part of the business world. In order for a business to succeed in this day and age, the art of financial technology must be mastered. Here are some of the leading FinTech trends of 2017.
Instant Electronic Payments
A major FinTech trend is instant electronic payment. With PayPal being one of the dominant leaders in the peer-to-peer payment platforms, other companies have begun to create systems of their own. A subsidiary of PayPal, Venmo, LLC, has become very popular amongst millennials, as it allows an incredibly simple transferring of funds from one account to another. With its user-friendly interface, people have an easy time sending money to one another, whether it be a large amount for a good or service, or to split the check at a restaurant.
Accounting Software Automated
For centuries, companies have hired skilled personnel to do the accounting and business keeping for them. Recently, FinTech startups have created softwares to make accounting automated, rapid, and surprisingly easy. An example of this type of software that has grown over the past few years is Quickbooks by Intuit. This software allows the user to connect the company’s bank accounts to the application; from there, most of the data entry from the user becomes unnecessary. The application includes features such as categorization of expenses, profit and loss reports, learning the patterns of the user, and much more.
Marketplace Lending for Real Estate Investors
Essentially synonymous to P2P lending, marketplace lending (MPL) is the process of matching lenders and borrowers with each other through online programs. Marketplace lending has recently become popular due to people losing trust in traditional banking after the recession in 2008. MPL gives an individual, who may have not had prior access, the ability to take part in the investment of a property, whether it’s getting a hard money loan for a fix and flip or to crowdfund a real estate project.
This trend is continually growing and is advantageous for its users due to its financial incentives and availability of credit where it was limited in the past. An online platform, such as Sharestates, enables its users to invest in real estate online and reap the benefits.
In addition to accounting softwares, blockchain is another useful method for measuring financial transactions, specifically in real-time. A sizable issue with digital currency is something known as double-spending. An electronic money transaction is essentially a line of code that can be accessed to represent a dollar amount. This code can be duplicated, and the money can be considered double-spent.
Blockchain technology, first used by Bitcoin, provides a database of electronic financial transactions that does not allow an exchange to go through unless approved by its extremely complex software. According to chargebacks911, wider adoption of blockchain technology could potentially help banks save as much as $20 billion annually by 2022.
The Future of FinTech
FinTech is relatively young and will continue to be integrated into all aspects of the business world. Whether it is used for a simple task like transferring money, or something greater like accounting and tracking budgets, financial technology is a crucial part of the work field. Every year there are new trends to be monitored and followed in order for one’s enterprise to be as successful as possible.
Financial technology, or Fintech, is the wave of the future, but it’s also very much a part of the present. Fintech combines finance and technology to make many tasks easier, less cumbersome, and faster. Most millennials are in the workforce and highly adept online and digitally – that’s 84 million people with an expected $7 trillion in liquid assets by 2020. We are only three years away from this reality, so if you’re not current on financial technology, it’s time to get comfortable with it.
Mobile banking has been around and expanding for a couple of years. Most banks offer it in some form, but it’s not just banks: Paypal has been doing it for more than a decade in a basic form and has been steadily adding options. According to a recent survey, nearly 75% of Millenials use mobile banking apps, and over 70% of them also look forward to new financial services arriving through Google, Apple, Square, and Amazon, as well as others- these are not banks, but offer banking and fintech services along with Paypal.
However, fintech is much more than banking apps and online services. It also includes crowdfunding in general, real estate crowdfunding, investment apps, apps, used by crowdfunding companies such as GoFundMe, financial comparison apps – helping people find the best fit for lenders or other financial services, and more.
As of mid-2015, nearly $2.3 billion has been raised for fintech startups that target Millennials, but will be available to all users, some of these include Level Money, a money management and budgeting platform acquired by Capital One; Acorns, an investment platform; Osper, mobile banking and prepaid debit card; iBillionaire, strategies and investment data on trends from billionaire investors; StockTwits, a social network for traders and investors; Moven, a personal money coach and debit card; Robinhoo, a stock trading service; as well as Venmo, a digital wallet for payments and remittances acquired by Braintree. This list is just a taste of the diversity of fintech offerings. I addition to that, in the first quarter of 2016 nearly $5 billion was raised to finance some of the largest fintech app deals, There’s no end in sight to the possibilities.
The great thing is that apps address a variety of user needs – investing, banking, and finances are all made easy with apps that help users track, learn, and process what they want to do. In addition to those above, at least 22 fintech apps are being developed to specifically interact with Tesco Bank, a retail bank;
Scutify, an investors and traders social network; Apple Watch; Prism, a bill pay and money management platform; and Yoyo Wallet for making payments through digital wallet. Those don’t even include the many fintech apps being developed or improved by companies all around the world. And of course, almost every mobile fintech app is working to support the Apple Watch.
Current estimates are that almost one-quarter of Millennials do not carry cash. Instead, they use smartwatches, credit cards and mobile apps as a means of paying for what they purchase.
Financial technology makes life easier, simpler, and even faster; that’s the real beauty of these apps. In a time when people start tapping their toes after just a few seconds of waiting because they’re thinking about all the things on a never-ending to-do list, fintech allows people to skip most of the trips to storefronts and simply use their laptops and phones.
Real Estate Crowdfunding through Financial Technology
Fintech apps offering specific services such as real estate crowdfunding are cutting-edge, but no longer something of the future — they are here and should be investigated by savvy investors and entrepreneurs.
Save Time and Invest with FinTech
You’ve probably already got financial technology apps that you use on your mobile phone or the internet, but you should be looking for more apps to use as ways to save time, increase efficiency, and open up new horizons for managing and investing your money. Entrepreneurs should always look for ways to join future trends in early stages of development. Discovering more fintech apps, such as the real estate crowdfunding app from sharestates.com, is one way to do just that.
There are multiple indicators that Fintech is not just a passing phase. For starters, as previously discussed, fewer tech companies are going public. While that alone would not account for the rise in FinTech, the fact that more and more FinTech companies are attracting private venture capital is a huge indicator. Plus, traditional financial insitutions are throwing their money into the ring, which says more than a stampede of unicorns.
The Most Funded FinTech Companies
CrunchBase reports that March 2016 was a big month for FinTech. Specifically, these 10 FinTech companies raised the most money in this nascent and rising sector:
- Betterment– Raised $100 million in a series E round led by Investment AB Kinnevik. Launched in 2010, Betterment is leading the way in how investors manage their portfolios and lowering fees in the process.
- Gusto– If you’ve never heard of Gusto, it’s because they recently changed their name from ZenPayroll. This start up opened in 2011 but expanded last year with it’s name change. Last month they raised $67 million, according to Let’s Talk Payments.
- Connecture– Francisco Partners led a funding round for Connecture that landed $52 million in the latter’s lap. They specialize in web-based solutions for the health care industry.
- Open Lending– Austin-based Open Lending raised $40 million with just one investor in an equity arrangement. They’ve provided automated lending services to the financial industry since 2000.
- M-Files– Another Texas-based company headquarters in Dallas and provides document management solutions to businesses. M-Files, started in 2001, took in $37.5 million from an all-European contingent of investors.
- AlphaSense– This financial search engine headquartered in San Francisco raised $33 million from four investors. They opened their doors in 2008.
- JustWorks– Since 2012, Justworks has been helping companies manage their human resources better. Their Series C round led by Redpoint earned them an additional $33 million operating capital.
- Edgewater Markets– Edgewater’s niche is technology focused on the aggregation and distribution of foreign exchange for institutional investors. FTV Capital invested $30 million in a private equity round.
- EZBOB– Based in London and founded in 2011, EZBOB raked in 20 million British pounds with a Series C round led by Leumi Partners and Oaktree Capital Management. That translates into almost $28.3 million.
- MoMo– MoMo stands for “Mobile Money” and is a leader in the mobile payments sector. Users have a digital wallet that allows them to transfer money to each other without a mediator. Based in Vietnam, This 2014 start up closed out a Series B round led by Standard Chartered Private Equity with $28 million.
Why There’s Serious Money in FinTech
Why is there so much investment pouring into FinTech? Why right now?
These funding rounds are a testament to the trust that traditional banks and other financial institutions have placed in digital finance. The World Wide Web is now 26 years old and people are using it to buy and sell with all the gusto they’ve always had in participating in barter. Digital money is here, but the best of digital finance is yet to come. It’s almost self evident.