We were chatting and he was asking how my business was going, and I said it was going great, and that I have been having some real great success in helping my clients obtain financing for their real estate investments through crowdfunding.
“Crowdfunding? What’s that?” was my Dad’s curious response.
Now, I realize that he’s retired and the most important thing in his day these days is where they will go to dinner, but in case you (like me) aren’t lucky enough to be at that stage of the game, you might want to tune in and see what’s happening on this relatively new frontier of lending.
In case you aren’t clear on exactly what crowdfunding is, let’s start with a quick explanation.
Essentially, in its raw form, crowdfunding is simply a way for people to review investment opportunities on a wide range of things, like start-ups, to benefits, or really anything that requires money to do.
In the past year or two, there have actually been hundreds of companies that have popped up that focus their investment opportunities on good old real estate!
The upside for the investors according to Forbes is that over a 15 year period, real estate has outperformed the stock market 2:1.
10.75% Real Estate
5.00% S&P 500
So, as a straight investor, one can pick the projects and have their funds dispersed over many projects so that risk is substantially mitigated.
This has become a very popular way for many people to invest for sure as many of the crowdfunding companies have raised billions in capital which is now available to the real estate investors themselves.
So, how can this work for you?
Well, you can now present your project to the crowdfunding source and if it meets whatever criteria they have established, they will issue terms, and then put your project out to their pool of investors. As soon as enough investors have agreed to participate (i.e. enough capital has been committed for your loan) then the loan will go into underwriting and closing.
Many of the sources can close loans in extremely short time frames!
I personally just closed a loan for a borrower with one of my favorite crowdfunding lenders and was able to get him the highest leverage with the best rate that he could find anywhere, and the loan closed much faster than it would have with a bank or regular lender!
So, one of the biggest advantages this method offers is market appetites are no longer driven by stiff bankers sitting in a dark room somewhere deciding on whether or not they want to lend to you!
If all this sounds a little too good to be true, let me assure you, it’s not.
However, as with all things there is a bit of a catch…
That catch, or let’s call it a “challenge” is that most people still have no clue who or what companies are actually utilizing crowdfunding for real estate financing.
And, if they ever do figure that out, how will they know which company will be the best possible company for their SPECIFIC DEAL?
For instance, there are crowdfunding companies that specialize in 1-4 unit investment fix and flip loans ONLY. Some will only do commercial loans over $10M, some will do virtually anything as long as it’s over $1M loan amount. Some will only do a very specific type of property in a very specific geographic area, and on and on…
You see, this is the BIG challenge that virtually everyone faces out there. Even the best loan brokers are not able to overcome and keep up with this enormous challenge.
Well, fortunately, we have developed a business model designed specifically to overcome this HUGE challenge!
At Capital Connection- 100% of our focus and resources are devoted to finding, vetting, understanding AND building relationships with these types of sources.
After rigorous review and only if we determine that the source offers something unique and highly competitive, they will be added to our online “smart filter” and our subscribers will then be given DIRECT ACCESS to the best possible source for their SPECIFIC deal and its parameters.
We are currently actively reviewing many crowdfunding companies so that we can continue to bring our subscribers the Best of the Best that we can find.
So, bottom line- is crowdfunding for real estate the next BIG thing? I really believe it is, the question really is- which one is BEST for YOU?
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