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Real Estate Crowdfunding – What’s In It for You?

By Philip M. Shasteen | Categories: Articles, Real Estate, Finance & Land UsePrint PDF November 2014

Phil Shasteen was invited to speak at the National Association of Realtors annual convention in New Orleans on November 6th on the exciting topic of crowdfunding.  Developers of real estate projects of all types and sizes are raising millions of dollars through this new funding source.  A simple Google search for “crowdfunding” or “real estate crowdfunding” will produce hundreds of entries.

Crowdfunding broadens the path for marketing to potential capital sources.  Enabled by the JOBS Act, for the first time ever, developers are permitted to advertise to the general public to attract investors in their projects without having to register their offerings with the SEC.  The ability to raise funds in this way is a significant advance and has made capital available to developers on an unprecedented scale.  Numerous web-based platforms have arisen to serve the demand, and developers are enthusiastic.

As with all great ideas and new technologies, there are nuances to crowdfunding a project. Crowdfunding can be misunderstood, and not all crowdfunding platforms are alike or legally compliant.   A developer remains responsible for all fundraising activities, so it is critically important for developers considering this avenue to do their due diligence and understand the differences between the platforms and the sponsors who maintain them.  It is also important for developers to understand their obligations under the securities laws when they use crowdfunding to raise capital.  For the right project and through the right platform, crowdfunding can present a new path for funding developments and allows the developer to attract investment from sources that might not have learned of the project except through general advertising.  Also, with traditional lending sources dependent upon increasingly strict underwriting criteria, there is an appetite for new crowdfunding portals who are “doing things right”.

Crowdfunding might be of interest to you.  Phil would be happy to discuss whether it could work to launch your development or increase your business in the new year.  Happy holidays!

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