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How Crowdfunding is Transforming the Traditional Real Estate Market

The traditional real estate market used to be an exclusive market reserved for those with an elite network and high net worth, entry often reliant on ‘who you know’. Today, that market looks very different thanks to crowdfunding.

Everyone now has an equal opportunity to invest in real estate regardless of wealth, risk profile, gender, profession, age, and even location (non-U.S. investors can invest too). The financial and network barriers that kept the traditional model alive are no longer thanks to changes in the law, increased technological innovation, growth and understanding of crowdfunding.

One of the most significant changes of real estate market is increased accessibility, which is led by two forces – the law and technology. The passing of Title IV (Regulation A+) of the JOBS Act, ushered in a dawn of the non-accredited investor, giving each the ability to invest in institutional quality offerings such as private REITs.

Prior to Reg A+ going effective in June 2015, the law limited a person’s accessibility to real estate investments and REITs by their net worth or annual income. Those without a large net worth or annual income, commonly referred to as “Non-accredited Investors”, were prohibited from investing. This all changed when the law changed.

Couple changes in the law with the growth of crowdfunding technology and accessibility blossoms alongside efficiency and affordability because it’s all done online without the middle man. Individual investor can invest directly of their own volition with fund managers i.e. sponsors (without a financial advisor, broker or brokerage account!) thus avoiding costly intermediaries. Any ordinary individual with any amount of income, if they are over the age of 18, can invest.

Not only has real estate crowdfunding increased accessibility for investors, but also for developers and fund managers. There is no longer an absolute need a broker, a bank and/or a source of wealthy individuals or institutions to finance projects. There is a larger pool of potential investors and capital available – the unaccredited, which make up the overwhelming majority of the national and international public.

Technology not only allows for greater accessibility but also greater transparency, speed, and efficiency. With an online platform, investors know exactly what they are putting their funds into and what the project is aiming to achieve, and investment can be done without the need for travel and extended waiting periods.

It also provides an opportunity for further asset diversification. With crowdfunding, investors have the flexibility to cherry-pick and distribute their investment dollars by type of project and geographic area, thus diversifying and mitigating risk. Investments are hands-off thus investors are not limited by time availability, geography, or as mentioned earlier, net-worth.

Above all that, real estate crowdfunding has the power to create systemic change in society by leveraging the wealth of the collective public to fund projects the crowd cares about and can connect with. By investing in funds that are focused on not only generating a financial return, but also solving social issues, like housing in the U.S.

The transformation of the real estate market areas of accessibility, efficiency, cost, and impact , as a result of crowdfunding, has only just begun. We, at ImpactHousing.com, are excited to see what the future has in store.

What other crowdfunding transformations do you see? Comment below!

Sources
https://www.inc.com/aj-agrawal/how-crowdfunding-has-changed-real-estate-investing.html
http://www.huffingtonpost.com/jorge-newbery/crowdfunding-transforms-r_b_11875784.html

https://crowdfundinglegalhub.com/2014/08/18/recfunds-vs-traditional-real-estate-investment-an-overview-part-2/

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Impact Housing REIT, LLC.
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A reservation is not an investment. A reservation is non-binding and you will need to confirm your reservation when Impact Housing REIT, LLC offering is live to invest. By making a reservation, you are requesting an allocation in Impact Housing REIT's upcoming offering. A copy of the Preliminary Offering Circular may be obtained here. A reservation is non-binding and you may change the amount at any time. Reservations may be accepted in whole, or in part, or not at all by Impact Housing REIT. If granted, you will be asked to confirm your investment once Impact Housing REIT's offering has been qualified by applicable authorities and the fundraise has officially begun.
Disclaimer
Impact Housing REIT, LLC will invest in multifamily properties, income-producing real estate, a market that may produce returns that are different than the returns an investor could expect from other markets, including the stock market. Before our Sponsor receives anything, investors are entitled to a 7% annual return on their investment. Note: There is no guaranty that investors will receive any return on their investment, or get their capital back. In the last 5 years, the Sponsor has completed 28 projects (totaling 40 multifamily properties) which have achieved an average annual cash on cash return of 8.55% and an average project IRR of 24.74%. For more information about the Sponsor’s track record, see the Offering Circular, here. However, Impact Housing REIT, LLC is itself a newly formed company with no historical data of returns, and there is no assurance that it will achieve comparable success. The results that the Sponsor has achieved in the past do not guaranty that it will achieve similar results in the future. Like any investment, there is the potential to lose some or all of your investment. The ability to make distributions will depend on the availability of cash flow each quarter. There is no guarantee that we will be able to make a distribution in any given quarter. For a list of the most significant risks, click here.
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Under Contract: Maryland
* Highrise with spectacular views
* Twelve Floors, 143 Units
* Built in 1969
* Strong 96% Occupancy
* Naturally Occurring Affordable Housing
* RUBS / Water Conservation Potential
* Purchase Price: $7m to $8m
*Note that this property may or may not ultimately close escrow subject to due diligence and other various factors. Impact Housing REIT cannot guarantee that this specific property will end up being one of the multiple assets owned by the fund.
Target: Colorado Springs
* Mountain views
* Near commercial district
* 64 Units
* Built in 1967
* New roofs recently installed
* Units currently renting below market
* Purchase Price: $5m to $6m
*Note that this property may or may not ultimately close escrow subject to due diligence and other various factors. Impact Housing REIT cannot guarantee that this specific property will end up being one of the multiple assets owned by the fund.
Target: Mesquite, Texas
* Strong submarket: 96% Occupancy
* Located in suburb just outside of Dallas
* Multifamily, 190 Units
* Built in 1959 -1972
* New roofs recently installed
* Renting at 25% - 50% below market
* Purchase Price: $8m to $9m
*Note that this property may or may not ultimately close escrow subject to due diligence and other various factors. Impact Housing REIT cannot guarantee that this specific property will end up being one of the multiple assets owned by the fund.
Disclaimer
Impact Housing REIT investments are expected to be spread throughout the United States. The Manager expects Impact Housing REIT’s investment portfolio to consist of direct equity interests in individual properties. The Manager will generally target equity investments ranging from approximately $3 million to $10 million. Note that these properties may or may not ultimately close escrow subject to due diligence and other various factors. Impact Housing REIT cannot guarantee that these specific properties will end up being one of the multiple assets owned by the fund or that investors will receive any return on their investment, or get their capital back. In the last 5 years, the Sponsor has completed 28 projects (totaling 40 multifamily properties) which have achieved an average annual cash on cash return of 8.55% and an average project IRR of 24.74%. Past performance cannot guaranty future results. For information on our Sponsor’s track record, see the Offering Circular, here.