“Investing in prime real estate is a great way to diversify your portfolio.” Have you ever heard this and thought, “Sure, but how exactly am I supposed to find the right deal?”Often, advisers will tell you what to do, and rarely tell you how to do it. In less than a minute, we would like to explain how to find and invest in prime real estate.
Diversify Your Investment Portfolio
Real estate development, for many, may seem like a tough industry to work in. Unless you are in an exclusive club, the chances of stumbling upon a great development opportunity are slim-to-none. This landscape has changed. Real estate crowdfunding has made it possible for accredited investors to diversify their portfolios by breaking into real estate investment.
The Benefits of Real Estate Crowdfunding
How is this possible? Through marketplace lending and real estate crowdfunding. Here’s a short video of our CEO and Co-founder, Allen Shayanfekr, explaining the benefits of real estate crowdfunding in 45 seconds.
“Historically, real estate has been pretty difficult to access for people. It’s time-consuming, expensive and it’s just hard to source quality deals. The everyday person- typically- can’t find a deal that’s appropriate for them or that is cost effective for them.Real estate crowdfunding actually makes it a lot easier for the average person to access that investment by bringing together developers and speculators that have access to a ton of quality deal flow. We can then connect them with investors that are looking for a potential home to place their capital.”
Allen Shayanfekr, Sharestates CEO
You know a business niche has come into its own when a major university starts offering certification courses. In this case, MIT is offering a FinTech certification course for a mere $2,300. The MIT FinTech course is being offered completely online. It’s unclear whether the certfication will improve what is happening in financial technology, but lectures include some of the biggest names in the FinTech niche, including:
- Chris Larsen, CEO of Ripple
- Jeremy Allaire, Founder of Circle
- Rene Reinsberg, VP at GoDaddy
- Christine Loredo, VP at Yodlee
- Michael Casey, senior advisor of Digital Currency Initiative at MIT Media Lab
3 Online FinTech Courses Worth Considering
While MIT wasn’t the first organization to offer a finance and technology certification course, they are the biggest name to do so. For example, last year CFT (Certificate in Finance and Technology) opened its doors to offer certification exams in cities around the world. However, their program seems to be geared toward traditional finance professionals who want to expand their knowledge of technology. Whereas the MIT course is more geared toward entrepreneurs who want to establish a product or service and seek venture funding.
Another innovative online FinTech course is Fintech 101, geared toward current professionals in finance who want to learn about FinTech and how it is disrupting legacy banking and financial operations.
All of these courses have their place, of course, and serve a necessary purpose for keeping financial professionals up to date on the latest developments in one of the world’s longest running professions. Still, if you want to get even more basic, this 1-hour Udemy course will take you by the hand and lead you to FinTech preschool. It’s a good place to start if you don’t know what FinTech stands for.
Other Financial Technology MOOCs Worth Considering
We live in a world of MOOCs (massive open online courses). If you’re looking for a few to take your finance career to the next level or you want to see what all the fuss is about by marrying finance and technology, then you might be interested in checking out these online schools (many of them are free):
- Coursera– coursera offers MOOCs in several disciplines for major colleges and universities around the world. Finance is just one of their categories.
- Khan Academy– Khan Academy provides online education for all ages from elementary school to adult. Their finance courses aren’t as extensive as Coursera’s, but they’re worth checking out.
- Class Central– Their inventory of finance MOOCs is fairly extensive.
- PwC– Price Waterhouse Coopers offers a whole bevy of continuing education courses for finance professionals in all areas of finance through their Open University.
Whether you are working as a finance professional, an entrepreneur with the next brilliant idea in finance, or an investor trying to figure out your next move in finance, instead of going back to college, why not enroll in an online finance course through one of these top providers?
Have you taken a MOOC before? Share your story below.
It’s Earth Day! Today, we celebrate just how much the planet means to us. We recycle, go for a walk, and eat clean. Yet, it is the individuals and institutions that daily take care of the earth that are truly making a difference.
The United Nations Environment Programme lays out the exact waste problems we are facing in their 2015 Global Waste Management Outlook. This extensive report covers just how much waste we are producing and how we plan to eliminate and dispose of this waste.
You may be wondering exactly how marketplace lending is helping the environment. There are many ways that investing in real estate through crowdfunding is beneficial to the planet; let’s look at a few.
Less Paper, More Digital Documents
Traditionally, when applying for a loan, banks would require an endless stack of paperwork simply to determine approval. If you weren’t approved that stack of paperwork stayed on file for years. Can you image how many trees died just for a loan denial over the years? Typically real estate crowdfunding only uses paper documents for closings, otherwise the entire process is done digitally. You can upload projects for review, check the status of projects, as well as invest online using secure portals.
This is not to say that you will never put pen to paper throughout the investing and borrower processes, but the amount of waste will be noticeably less than that of traditional methods.
Financing Community Development
Think about the old vacant homes in your neighborhood or nearby. Don’t you wish someone would purchase those homes and restore the value to the property as well as the neighborhood at large? Marketplace lending, specifically real estate crowdfunding provides loans to real estate borrowers who seek to develop fix-and-flip properties.
A benefit that is not often recognized is that the neighborhood quality is going up through these developments. Previously abandoned and foreclosed homes will now undergo rehab developments that will help to attract buyers. This is a cyclical chain that was kicked off through marketplace lenders providing short term loans to qualified developers.
Real Estate Crowdfunding Means Less Time Waiting
Real estate crowdfunded loans close in a fraction of the time that it would take to close a loan through a traditional method, you have time to do more of the things that really matter. Now you can start that garden that you have always wanted, or work out, recycle more, and volunteer. The options are endless.
On this Earth Day, create a habit of doing good not just to yourself and those around you, but to our planet as well! Here’s a list of great Earth Day quotes from some of the world’s greatest thinkers:
“Here is your country. Cherish these natural wonders, cherish the natural resources, cherish the history and romance as a sacred heritage, for your children and your children’s children. Do not let selfish men or greedy interests skin your country of it’s beauty, its riches or its romance.”
“I only feel angry when I see waste. When I see people throwing away things we could use.”
“A nation that destroys its soils destroys itself. Forests are the lungs of our land, purifying the air and giving fresh strength to our people.”
Sharestates has reached a new milestone. Through institutional and individual investments, Sharestates has raised over $300 million in total funds for real estate loan purchases.
Sharestates Institutional Commitments and Capital Partners
Partnerships with Colony American Finance– Financial solutions for residential real estate investors- and Prime Meridian Capital Management – Investment firm specializing in online P2P lending -have helped to push Sharestates to $300 million in funds for loan purchase.
Sharestates made quite a buzz in the Fintech world when news of the $300 million hit. Some of the news outlets covering this story were:
New Capital Partners Colony American Finance and Prime Meridian, had some pretty nice things to say about working with Sharestates.
COO of Colony American Finance, Ryan McBride, stated “We are thrilled to expand our presence in the marketplace lending space by partnering with a market leader like Sharestates, which has demonstrated expertise in both deal-sourcing and underwriting.”
Managing Director of Prime Meridian, Peter Lowden, added “There are only a handful of platforms in the real estate marketplace lending space that have shown the ability to source and identify some of the strongest borrowers and best projects, which is the key to consistent results. Sharestates’ track record for delivering value-added returns makes it an attractive platform for purchasing loans.”
Allen Shayanfekr, CEO, on Sharestates Investments
“Institutions, like Colony American Finance and Prime Meridian – as well as accredited individual investors – are looking for partners in this space that have large pools of qualified borrowers to select from and track records that reflect superior underwriting. These loan purchases will enable us to offer frequent opportunities for investors to diversify, while also giving individuals the increased confidence that comes with investing in the same deals as accomplished institutional firms.”
As more investors look to find safer markets several are turning to marketplace lending. The transparency and quality underwriting that Sharestates exhibits makes the platform a great fit for many investors.
In an interview with Financial Poise Allen added,”what makes Sharestates different from other real estate marketplace lending platforms is that we have unmatched access to dealflow. This allows us to be incredibly selective about the deals that we ultimately offer to our base of investors. Currently we are approving roughly 2 percent of the applications we receive. Since we launched in early 2015, we’ve offered more than 130 deals, originated more than $100 million in loans, returned more than $20 million to investors on 30 loans paid in full and with a principal loss of zero.”
With every new venture or project, you need capital. From crowdsourcing to peer-to-peer lending to Shark Tank, we’re always coming up with new ways to get funding for our next venture. The latest trend to hit the market is Marketplace Lending. Sit tight, we’ll break it down so you can stay on top of the latest money lending trends available.
Entrepreneurs, real estate developers, and just most people are skeptical of the investment banking industry and Wall Street when it comes to borrowing money to start a business or to help a business grow. Rightfully so. When it comes to your money, you should be careful and you should always understand the terms of any agreement with anyone offering to lend you money. One thing we learned from The Big Short is that confusing lingo used by banks and lending institutions is part of their strategy. They don’t necessarily want you to understand—because if you do, you will find that your skepticism is justified and start looking elsewhere for simpler, more comprehensive, and more transparent lending and borrowing solutions. This is where marketplace lending, specifically peer-to-peer lending and crowdfunding come into play.
Crowdfunding is something most of us understand at this point. It’s the simplest, most risk-free way of acquiring capital for a startup or project. Crowdsourcing is great for the startup phase of a company. If you’re thinking of setting up the best darn lemonade stand on your block this summer, then a crowdsourcing campaign is a great way to get small amounts of cash from a lot of people who think your idea is worth a small investment… And off to the market you go to buy all your supplies with your funds.
Once your lemonade becomes the talk of the town, you’ll need more money to help you expand to every block in your neighborhood. Maybe even take your stand and turn it into a global franchise — wouldn’t that be nice. But you’ve already exhausted your family and friends, and your crowdsourcing community. It’s time to step up and find a lender with deeper pockets. But why stop at just one lender when you can have many? This is when you look towards peer-to-peer (or “P2P”) lending. This puts more established startups and small businesses in touch with bigger investors — still with the ease and transparency of crowdfunding.
Misconceptions About Peer-to-Peer Lending
The biggest misconception about P2P lending is that a “peer” can be anyone from your grandmother to a larger institution or corporation. Now your gut may have jerked at reading “larger institutions and corporations”, but don’t run away just yet. P2P lending is a way to get funding from many large investors more quickly, and often at a much cheaper rate than borrowing from the bank. These investors or lenders—whether private citizens or professional lending institution—will cover a share of the amount you want to borrow, letting you take on several investors, who take on the risk of loaning you the money.
New York Real Estate Crowdfunding
Real estate developing has a history of being an exclusive club that you pretty much had to be born into. The biggest and best developments were passed around, like a secret handshake, that only the wealthy knew. Marketplace lending sites have swung the doors wide open for anyone to invest in huge real estate development deals — or small deals, it’s up to you.
Real estate crowdfunding is the wave of the future, and the easiest, most transparent way to diversify your investment portfolio and get in on some prime New York real estate. All you need is $1,000 and a dream, and you can grab yourself a slice of the Big Apple.
Investing in real estate can seem like a daunting task without working knowledge of the industry. There are several ways to get started in real estate investing, many of which have traditionally been accessible only to those highly connected to the deals, the exclusive “old boys’ club”. Marketplace lending (also known as peer-to-peer (P2P) or real estate crowdfunding (RECF)) has taken the spotlight lately as a premier passive real estate investment style open to the crowd.
Investing through Marketplace lending is a great way to become acclimated to the crowdfunded investment process. While zeal for the industry grows, it is important to remember that there are regulations dictating eligibility for real estate crowdfunding investment, for Sharestates the foremost being that an investor must be accredited.
What Does it Mean to be an Accredited Investor?
The requirements for being an accredited investor are defined by the U.S. Securities and Exchange Commission. The intent (according to the helpful definition provided by Investopedia) is to assure investors “are financially sophisticated and have a reduced need for the protection provided by certain government filings”.
The basic requirements for an individual to be considered an accredited investor are:
- A consistent annual income exceeding $200,000 (or a joint annual income of $300,000 or more if married).
- A net worth of $1 million or more, excluding the value of primary residence.
In the case of crowdfunding platforms, investors will be asked to assert that they meet this criteria.
Consequences of the JOBS Act
As previously covered in our blog post about changes to the JOBS Act, there are more updates which take effect on May 16, 2016 allowing real estate crowdfunding platforms to include non-accredited investors. This means that the investment options for those who do not meet accreditation requirements are expanded. There are still some rules that will heavily regulate investments for the non-accredited investor:
1. In a 12-month time period, startups cannot receive more than $1 million in total investments from non-accredited investors.
2. Non-accredited investors are not permitted to invest more than $2,000, or 5% of their annual income if that income is less than $100,000.
The reason that the SEC heavily regulates investments is to ensure all investments are safe for the platform as well as the investor. It is to the benefit of the investor and the health of the industry that the SEC keeps investment options controlled.
The JOBS Act Title III opened marketplace lending to non-accredited inventors but with very specific rules. One of those rules limites raises to $1M or less. Sharestates loan sizes are much larger than $1M. Title III also requires audited financials for raises over $500,000 and most short term real estate holdings to not have audited financials. These are only two of the stipulations that currently prevent Sharestates from opening its loans to non-accredited investors. To learn more about the Title III stipulations visit sec.gov.
Transparency of Real Estate Crowdfunding Platforms
You may be asking, what’s in it for me? Why do I have to adhere to these strict investment rules? Aside from the previously-acknowledged security that comes with industry regulation, investors can expect additional transparency commitments from real estate crowdfunds. In other fund-based real estate investments, investors can simply designate how much they would like to invest into real estate with no knowledge of where exactly the funds were going. Marketplace lending has changed this completely. Now, investors can select the very property that they want to invest in, as well as review documentation regarding that property.
Investors now have the option to view rehab budgets, purchase contracts, appraisals, and any other public information associated with the investment property. It is clear that real estate crowdfunds have the same commitment to their investors, as the investors have to the platform. This fosters a lasting relationship that can be seen in the repeat users of each platform. As marketplace lending grows, regulations will grow and change as well. This is just the very beginning of an industry that is here to stay!
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.
Wondering where to put your investment dollars in a high volatility market? You know the old adage, “what goes up must come down.” History proves it. Even more so, just look at today’s headlines. The CBOE Crude Oil Volatility Index experienced a 69.57 percent year-to-date change with a 52-week high of 80.78 and a low of 28.81. Last year, hedge funds saw the worst year since the 2008 financial crisis, and this year isn’t looking good either. The Standard & Poor 500 Index fell 6.7 percent in January.
What’s more, internationally, economies are in decline; China is slowing down, Brazil is in recession, and Japan is stagnant. Investors are running from stocks, equities, and foreign investments. But where are they going?
According to Bloomberg institutional investors are putting their trust in real estate and other non-liquid assets. Who can blame them? A few brave fund managers are offering new opportunities in the hedge fund market as everyone else is getting out. As they say, wise investors run against the grain. But you can’t deny it’s a risky venture. In times of high market volatility, the safest place to put your money is in strong economies and real estate.
Volatility doesn’t mean there’s no hope. It simply means the wisest investors transfer their hope from high-risk investments to more solid and proven ones. There is a time to stand in the rain and a time to come in from the weather. It may be time to fold up your umbrella and step out of the torrential downpour. But keep your chin up!
What’s So Good About Real Estate Investing?
Last month, Bloomberg reported that foreign investors are flocking to the U.S. real estate market. A survey by the Association of Foreign Investors in Real Estate (AFIRE) indicates that foreign investment in U.S. real estate has gone up every year since 2009, reaching almost $90 million in 2015. It’s expected to do even better this year.
New York is the top market worldwide for real estate, followed by London and Los Angeles.
Which Real Estate Property Type is The Best Investment for Investors?
Bloomberg says that within the U.S., multifamily and industrial real estate were the favorite property types for a second year, while retail moved up to third place from fourth. Offices fell to fourth from third, and hotels stayed at No. 5, according to the survey. Factors contributing to the U.S. real estate market being a good investment vehicle right now are low inventory and an aging millennial population ready to buy. Scarcity drives up prices. Higher demand will also affect the investment environment, which means that getting in now could prove to be the wisest investment to make in 2016.
Millennials are the largest generation living, and the oldest members of the generation are just hitting their thirties, getting married, starting families, and buying their first homes. If that doesn’t spell opportunity, I don’t know what does. On the flip side, lower income millennials may not be able to afford a home, and since incomes aren’t keeping up with the cost of living, that means the rental market is still wide open, which accounts for multifamily real estate being a hot item among foreign investors. There are plenty of reasons to be hopeful about investment opportunities even in a high volatility environment. Just move your money out of high-risk vehicles into proven, more stable vehicles in strong economies.
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.