Crowdfund Insider | Bret Conkin | June 11, 2016

Banks have been criticized in the media for failing to provide lending to worthy people and businesses since the sub-prime lending crisis.  Real estate investors and developers faced restricted access to the capital they sought for their property or project.  Fortunately, new financial technologies have emerged to disrupt old ways of banking.  The banks are noticing.

VestMunity’s innovative approach caught the eye of Citi, the fourth largest bank in the USA.  Mason’s passion and plan to enable other Florida entrepreneurs to finance “fix and flips” won him a $10,000 prize at the Miami Fintech Forum, the first event in the Inclusive Enterprise Series, a new program backed by Citi Community Development and Village Capital.  (For more, see VestMunity on the Citi blog here).

An accessible solution

Mason is actually trying to solve two problems related to accessibility.  The first is that while regular Americans may own a residence, they lack a simple and secure way to build wealth by investing in other properties.  Title III regulated crowdfunding was introduced last month providing new access for retail investors. By teaming up with other investors, each contributing small amounts, soon they can.

Mason commented, “Three of the top five metro areas in the country for distressed properties are in my home state of Florida, according to RealtyTrac. But while rehabilitating and reselling homes can result in a lift to neighborhood property values and provide local investors with wealth-building opportunities, the cost of doing so is often prohibitive even for experienced real estate developers.”

“The average person has very limited access to the information and resources they need to safely pursue these types of investments, which is why I started VestMunity – I wanted to create a platform that connects everyday people to accessible investment opportunities.”

So the second problem being solved is an innovative method to provide “crowd” financing to select real estate rehabbers since banks may not be an option, particularly if the borrowers are women or minorities.

As Georgia Quinn, CEO of iDisclose, stated recently in Crowdfund Insider, “Title III opens up financing opportunities for many types of businesses that have traditionally been denied other means of capital.”  She explained that traditional funding sources have a race and gender profile that “looks like themselves” and their tendency to fund those “with similar backgrounds.”

Quinn believes that crowdfunding provides the platform to utilize assets like social networks, brand equity and other strengths that banks and other funders fail to incorporate into their criteria.

VestMunity is a platform then that offers a solution to both problems.  VestMunity provides high yield real estate secured returns to investors for as little as a $1,000 investment.  Second, VestMunity offers a better financing option for distressed properties that provides lower cost capital plus market exposure for renovators.

Is a refurbished Florida property a good investment?

In 2006, according to Zillow, the median Florida home value was $256,000.  In 2012, the value dropped as low as $126,000.  As of April 2016, the value has grown 48%, or roughly 12% per year, as values bounced back to a median Florida home value of $187,000.  Could the values continue their climb back to 2006 peak levels and beyond?

See: 

• Crowdsourcing expands world of corporate real estate investing

• Prodigy Network CEO Rodrigo Niño Updates on Real Estate Market & Future Plans

One indicator is comparing the annual performance of US Housing to other asset classes like gold, commodities, stocks, bonds and so on.  For the period of 2011-2015, US Housing was the 3rd best performing asset class of nine measured at a 5.73% return nationally with only stocks and commercial real estate higher.  For 2015, US Housing was the top performing asset class. (Source: BullionVault).

While the economy and other factors impact value, the renovation and repair of distressed properties in good neighborhoods is a proven method of achieving strong returns for investors.  The cost of the refurbishment tends to have a relatively greater impact on the value, enabling the home to be sold at an attractive profit in a relatively short period.

Currently available deals include rehab loans in Miami, Plantation and Coral Gables with targets of $65,000-$300,000, 12-month terms and target returns of 18-20%.  Prospective investors can view photos, details on the property and loan, comparable homes values post-rehab and even view the neighborhood and home on Google Street View and Google Maps.

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