Martes 14 de abril de 2015

Real estate crowdfunding portals: Who, What, How?

Less brick and more computer? It must not, walk towards a reality with more brick with computer


The role of the Crowdfunding Portal.
The Who:
There are now more than 100 Real Estate Crowdfunding portals which offer a variety of products and services to both real estate Operators and Investors. Real Estate is considered the fastest growing segment in this new crowdfunding market.
The What:
At the core, a crowdfunding portal can be thought of as an online marketplace – meaning there are two distinct users – one who is “buying” and one “selling”. An online marketplace you’re probably most familiar with is Ebay.

For real estate, it’s better to think of the two sides as:

a.) The Real Estate Operator who needs funding and

b.)The Investors who have capital to invest.

All portals have some functionality around bringing these two groups together to help facilitate a transaction that meets both parties’ objectives. Some portals go beyond offering just the basics of online marketplace. Here are some of the additional services offered.

Portal Services:
Due Diligence – A portal that performs due diligence on your deals is generally beneficial to you for the following reasons:
• Quality: It ensures that deals that are listed to investors meet some minimum set of requirements. This ensures that if your deal passes due diligence, it is more likely to be noticed by investors – therefore increasing your chances of getting funded.
• Efficiency: Investors are going to have questions about your deal. The due diligence process should answer the majority of the questions an investor will have. This helps reduce the amount of questions and back-and-forth you will need to do with investors.
• Expertise: The portals provide another set of expert eyes to look at your deal. They could help you uncover certain aspects of your deal that went unnoticed.
Pre-Funding – Time is of the essence when closing a real estate transaction – especially with single family fix-and-flips. Some portals have established credit lines or have access to other internal capital that allows them to pre-fund your deal prior to launching a crowdfunding campaign. This gives you a dual benefit in the sense that you can get the capital you need relatively quickly while also getting your deal exposed to a large network of crowd investors.

Servicing – Investors want to get paid their interest and principle. Working with a crowdfunding portal allows you a single access point to make payments. The portal handles distribution of payments which allows you to focus on getting the deal done.

Investor Management – Dealing with multiple investors can be time consuming. Most portals are set up to handle this for you. Here are a few investor management functions a portal should be helping you with.
• Verification: The law is written in a way that you can only accept capital from Accredited Investors. The portal should be doing the verification for you so you don’t have to worry about this.
• Taxes: Reporting interest or capital gains income generated from your deals is required by the IRS. The portal can ensure that all appropriate tax documents are being sent to the investors.
• Communication: Investors are likely to have questions about your deal. The portal can act as an aggregator of these questions so that you don’t spend time answering the same question more than once.
Technology Tools – Crowdfunding portals are technology companies as much as they are financing companies. Some are investing in developing technology tools that they are making available to the operators that use their platform. These tools can help you find, manage and sell your properties more efficiently.

This is still a relatively new market, so many of the technology tools are still being developed. That said, keeping an eye out for new releases may give you an added edge in your respective market.

The How:

Portals structure their deals a variety of different ways. However, they generally fall into either Equity or Debt structures. What is important is that you understand which the portal offers and how standard their agreements are.

While each deal will likely be different and require some customization around how the terms are structured, you want to have a framework which you can reuse for each successive deal.

Debt versus equity deals can also impact your cost of capital and how much of the profit you keep. Choosing a portal that supports a debt or equity offering is important to ensure the offering aligns with your strategy. In an upcoming article, we’ll discuss what to consider when determining whether debt or equity better suits your needs.

The portal is a crucial piece of the crowdfunding puzzle. Finding one that has a similar deal appetite and offers services that support your business will be helpful in establishing a long-term relationship with this new way to fund your deals.



Publicado por
Miguel García
CEO de InmoCrowd
Especialista en crowdfunding inmobiliario

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