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Commercial Real Estate & Crowdfunding: Worth taking the plun

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by

Matthew Juels

on 21 August 2014

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Transcript of Commercial Real Estate & Crowdfunding: Worth taking the plun

PROS
"11 trillion dollar market...and growing" - Fundrise
Access to RE Market with small amounts of money
Investors can choose from a myriad of projects
online
Comparisons
BOTTOM LINE
Commercial Real Estate & Crowd Funding: Pros & Cons
What is crowd funding for real estate?
RealtyShares.com
Investing Public
Crowd Funding Platform
Realtyshares.com
Fundrise.com
Realtymogul.com
iFunding.com
etc...
Sponsor/Developer/Promoter
Fundrise.com
Fundrise Equity Investment Opportunity
CVS Plaza Chapel Hill
Chapel Hill, NC
Mixed-Use
Office over Ground Floor Retail
94% Occupied
100,634 sq. feet
70 feet of retail frontage
Parking garage with 291 spaces
(3 spaces per 1000 sq. ft)
Highlights
76% of building area leased to CVS and the University of North Carolina
Debt Investment Opportunity
RealtyMogul.com
Quick Facts
$845K Credit Line
9.5% Net interest rare to investor
2 year term
Purpose: 1-4 unit residential
Fix & Flip
Opportunities on a nationwide basis
Borrower: Visio Financial Services
President/CEO: Jeff Ball
Previous Employment
Investment banker specializing in semiconductor sector
Corporate securities lawyer
RealtyShares.com
Who can invest?
Currently,
only
accredited investors can invest
The SEC defines an accredited investor as some who:
1) - 5) Consists of business entities capable of looking out for themselves
6)
a natural person who has individual net worth....that exceeds $1 million
7)
a natural person with income exceeding $200K in each of the two most recent years or joint income with a spouse exceeding $300K
Investor benefits?
Accessibility
: Investors can shop deals online
Simplicity
: Investors can invest with the click of the mouse
Websites clearly present investment information, making it simple to monitor the status of an investment
Autonomy
: An investor can choose the amount he or she would like to invest
Investments as low as $1,000
Fundrise.com claims to sometimes list opportunities as low as $100
RealtyShares
Example of Investment Gallery
Fundrise claims 5% of total opportunities submitted are listed on its website
CONS
Like any RE investment, if the market goes south, an investor will lose
"Risk of default (from developers) is higher for crowdfunding sites" - Investopedia
Secondary market is absent
Investing in CRE Crowd Funding is gambling, like any other RE investment, and due diligence is imperative
"There are many harsh lessons to be learned from the gambling experience, but the harshest one of all is the difference between having fun and being smart." - Hunter S. Thompson
Screening Process
Complex Structure
Simple Structure
Sweat Equity +
Collateral
1st mortgage interest in the real estate assets
Personal guarantee from the sponsors
Full transcript