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The Draw of Real Estate Crowdfunding

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FoxBusiness | Kate Rogers | June 3, 2014

Real Estate Crowdfunding 300x168 - The Draw of Real Estate CrowdfundingAndy Feinstein says he’s a property owner and manager, but has outsourced all the headaches that typically accompany being a landlord.

The 45-year-old consultant, based in Washington, D.C., has a stake in an apartment complexes in Los Angeles and Mesquite, Texas, as well as a mobile home fund set up across the northeast. But he doesn’t have to worry about collecting rent checks or dealing with troublesome tenants.

He’s invested more than $50,000 through Realty Mogul, a crowd funding platform for real estate investing, and says it’s been well worth his while. He had formerly bought property in Blacksburg, Va., a college town, and says this alternative investment platform has given him less worries.

“Just like with any real estate investment, you give away a lot of the responsibility,” Feinstein says. “But instead of traditional investments, you get almost all of the same benefits--with less control--but also less headaches.”

Feinstein is one of 10,000 accredited investors and a part of the $20 million in transactions Realty Mogul has done in the past year and a half. Investments are done once a property or loan’s investment target goals are met, and in the case they are not, 100% of the cash is returned to the investor. Feinstein says he gets between 8% and 15% return on his investments coming in annually.

Realty Mogul CEO Jilliene Helman, 27, started the company in September 2012, five months after the Jumpstart Our Business Startups (JOBS) Act was passed. The JOBS Act loosened restrictions on crowdfunding allowing individuals to directly invest in companies.

View:  Open Avenue Wants to Bring Crowdfunding to Real Estate in Canada

“I saw this as an opportunity. It was the first the securities laws had changed in 80 years,” she says. “I saw this insatiable desire from high-net-worth investors, and the best vehicle I know of to generate cash flow and income is real estate.”

And Helman isn’t entering the real estate world on a hunch—she comes from a family of developers and investors. Her father on the industrial and commercial real estate side, and her mother on the luxury residential side of the business.

The company can be compared to a private real estate trust, but for lower income levels as investments beginning at $5,000, she explains. Competitors include Prosper and Fundrise.

That was the draw for Brad Hopkins, 54, from Dallas, who liked the low barrier to entry and diversity in investment options. The manager at Supreme Funding Group, invests in real estate through his family business, and has done $70,000 in deals with Realty Mogul—one retail shopping center in San Antonio and another single-family loan fund. He says there will be high growth returns on the shopping center of between 8% and 9.5% this year.

Related: Crowdfunding real estate catching on: The concept allows small investors to invest in their neighbourhoods

“There are always downside risks in [real estate] investments--in this case, you have to manage the managers of the property. You want to go in and look at financial results every month, make sure it’s heading in the right direction,” Hopkins says.  “Investing in real estate for where we are in our lifestyle, it’s more stable and gives an above-average return than the stock market. We will absolutely use this to fund our retirement.”

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