4 thoughts on “How Crowdfunding has Changed Real Estate Investing”
That *is* interesting. I wonder what will come of it. I’ll play the devil’s advocate here. Among the SEC’s real resistance to approving crowdfunding was the enormous possibility for fraud, not to mention the less exciting but even more likely possibility of unsophisticated investors simply losing their money. The old real estate investment “rules,” as elitist as they may have been, could have kept out those who did not have enough information about real estate purchasing. (Of course, it wouldn’t have kept our people with more money than sense, and there are always plenty of those.)
Real estate is always risky, and it seems like real estate ventures (condos, apartment complexes, strip malls) go under nearly as often as restaurants. Allowing lots of people to invest small amounts may do little more than ensure that a lot more people lose money.
Thoughts?
I think the idea of crowdfunding in real estate is a great one, although I think it has a lot of issues to work out to adequately protect individual investors. I like the idea of giving individual investors with small sums of money the ability to pick and choose real estate investments. However, this probably isn’t in their best interest since many of them are not real estate experts. Instead, I would recommend these individual investors invest in publicly traded REITs that are managed by true professionals, at least for now. This allows them a lot of the same flexibility in terms of small investment amounts, while deferring which properties to buy to true professionals. It also provides greater diversification within the real estate asset class than crowdfunding can provide at this point.
I take your point that “Allowing lots of people to invest small amounts may do little more than ensure that a lot more people lose money.” but isn’t that really the crowd funding game in general? I am encouraged to see that the JumpStart Our Business Startups Act of 2012 seems to have accommodated this new source of generating revenue. If nothing else, it aids in legitimizing crowdfunding endeavors and brings this type of funding to the forefront of the small business/ small investor conversation.
I am very curious to see how this plays out. I think one important aspect with commercial real estate concerns the developer or property owner/manager. Generally loans are made for a development based on a real estate developers reputation. With crowdfunding, I fear that smaller investors will not be as knowledgeable regarding the managers or developers and have the potential to lose their investment. At the same time, real estate can be a very profitable investment and I think giving greater access to the general population could be beneficial.
That *is* interesting. I wonder what will come of it. I’ll play the devil’s advocate here. Among the SEC’s real resistance to approving crowdfunding was the enormous possibility for fraud, not to mention the less exciting but even more likely possibility of unsophisticated investors simply losing their money. The old real estate investment “rules,” as elitist as they may have been, could have kept out those who did not have enough information about real estate purchasing. (Of course, it wouldn’t have kept our people with more money than sense, and there are always plenty of those.)
Real estate is always risky, and it seems like real estate ventures (condos, apartment complexes, strip malls) go under nearly as often as restaurants. Allowing lots of people to invest small amounts may do little more than ensure that a lot more people lose money.
Thoughts?
I think the idea of crowdfunding in real estate is a great one, although I think it has a lot of issues to work out to adequately protect individual investors. I like the idea of giving individual investors with small sums of money the ability to pick and choose real estate investments. However, this probably isn’t in their best interest since many of them are not real estate experts. Instead, I would recommend these individual investors invest in publicly traded REITs that are managed by true professionals, at least for now. This allows them a lot of the same flexibility in terms of small investment amounts, while deferring which properties to buy to true professionals. It also provides greater diversification within the real estate asset class than crowdfunding can provide at this point.
I take your point that “Allowing lots of people to invest small amounts may do little more than ensure that a lot more people lose money.” but isn’t that really the crowd funding game in general? I am encouraged to see that the JumpStart Our Business Startups Act of 2012 seems to have accommodated this new source of generating revenue. If nothing else, it aids in legitimizing crowdfunding endeavors and brings this type of funding to the forefront of the small business/ small investor conversation.
I am very curious to see how this plays out. I think one important aspect with commercial real estate concerns the developer or property owner/manager. Generally loans are made for a development based on a real estate developers reputation. With crowdfunding, I fear that smaller investors will not be as knowledgeable regarding the managers or developers and have the potential to lose their investment. At the same time, real estate can be a very profitable investment and I think giving greater access to the general population could be beneficial.