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Real Estate Crowdfunding Investing - What is it? And Are You Ready?

By John Cameron

Real Estate Broker/Owner with VITUS Realty, LLC 18189

May 04, 2016 06:38 AM

Real Estate Crowdfunding Investing

What is it? And Are You Ready?

Real Estate Crowdfunding Investing

In case you missed it there is an innovation in investing that’s going to literally
change the way Americans invest in Real Estate. It already has, and it’s not done. No joke. Real Estate Crowdfunding is here. Get ready for change, embrace it, or you’ll probably be out of the industry.

Investing from 1933 until now - 83 years

In order to advertise your business' stock you had to be registered with the Securities Exchange Commission
As a private company, you could only sell your stock to an Accredited Investor. A.K.A. - The Rich Guy
If you wanted to actually sell stock you had to be a broker.

Investing now -

Anyone can advertise their business as stock.
Anyone can sell stock to anyone, not just to rich guys.
They can sell their stock on a website called a Crowdfund Portal.

The JOBS(Jumpstart Our Business Startup) Act was signed into effect by President Obama in 2012 has gradually been going into effect. It allows . Then it removed and created The CrowdFund Portal. A website. On May 15th Title III of the JOBS Act goes into effect and the minimum investment gets lowered to $100. Welcome to the "Wild West" of Crowdfunding.

Real Estate Crowdfunding Investing

I know you don’t sell stock. Get ready to be floored. What if your investor client seeking a rental, bought one from someone who turned theirs into stock, by issuing it on a Real Estate Crowdfund? Let that sink in.

Issuing = Listing

In fact, they don’t even have to buy 100% of the rental. If they can’t afford the whole thing, they can only buy $100 of it, or whatever minimum investment amount the Crowdfund Portal has set. Then, they can just collect sit back in their pajamas and collect their portion of their Net Operating Income every month.

Oh and you know what else they’re not doing? Paying you a commission. I know you don’t sell stock, but you might not be selling rentals too much longer either.

The last time a financial or technological change this significant happened the Internet was created. The internet gained popularity about 1997. Remember AOL or Netscape dial up? I had just joined the crazy world of Real Estate about then . The next time was when social media was born. Was MySpace the first social media site? MySpace got big in 2007. Guess what’s going to go big in 2017?

So, what if you were the first Real Estate Investment Growth of Real Estate Crowdfunding Agent that sold homes on the internet? Or the first to market homes on social media? Or one of the first to sell shares of Real Estate on a Real Estate Crowdfund?

I have a partner, he’s the brains. I’m just a blue collar grunt that made good by working hard not smart.

We know what we're doing. We've been working on our business model for years.

What are you doing?

Follow me on Twitter for more information. Or just email me.

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Comments(8)

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Olga Simoncelli

Veritas Prime, LLC dba Veritas Prime Real Estate - New Fairfield, CT

CONSULTANT, Real Estate Services & Risk Management

John, I will look into this further, but having been a licensed Broker-Dealer (securities business license to trade in securities such as stocks, bonds, etc. and to offer financial advice), there may be some misleading info here, or perhaps just incomplete. For example, the "rich guy" you describe is probably rather a "sophisticated investor", meaning the offering might be complex or risky without proper analysis and not for everyone. The reason those securities need to be marketed by licensed professionals is so those pro's can actually explain properly what it is they are selling, what the risks are and how they can be mitigated or hedged. ...Interesting, in any case.

May 06, 2016 10:18 PM

John Cameron

Read up and get back to me about funding portals and crowdfunding. The rich guy is an accredited investor. Those securities no longer need to be sold via a broker/dealer.

There is no misleading info here. We have submitted SEC paperwork to start up a TITLE III Real Estate Crowdfund.

Google Title III Jobs act, and get back to me.

May 11, 2016 08:52 AM

Peter Mohylsky, www.athome30a

Property Management Inc.-Destin - Sandestin, FL

Call me at 850-517-7098

Interesting information here that needs to be researched further. Thanks for posting this information.

May 13, 2016 08:29 PM

Do your research and get back to me when you're ready.

May 14, 2016 01:17 AM

Sam Shueh

(408) 425-1601 - San Jose, CA

mba, cdpe, reopro, pe

At last brokerge the managing director told me the brokerage internal stocks will split soon. Pay 10K and it will go up in value. I talked to another guy who was a small share owner he told me he got dividend payout once or twice in several years not even regroup his loss. You can purchase and own a piece of paper that can not be redeemed.

May 13, 2016 11:21 PM

VITUS Realty, LLC - Seattle, WA

Real Estate Investing Seattle Tacoma

I understand your confusion. This isn't a brokerage internal stock. This is a partnership venture, where you buy a percentage of the project. I didn't hear you mention "CROWDFUND" This model has been ILLEGAL until about 18 months ago. So if you spoke with anyone who received any payout over a period of "several years" I'm here to tell you, you weren't talking about a CrowdFund. This isn't anything anyone has EVER been done Sam. And the "Average Joe" investment model only becomes legal on Monday. There is no "Brokerage" needed. Only a neutral 3rd party funding portal.

This is a hard asset secured by Real Estate There are restricitons on resale. The Funding Portal and entire industry, that no one knows about mind you, is HEAVILY regulated by the SEC. You can resell to an accredited investor "rich guy" at any time after you purchase your "share" or percentage. If you want to sell to a non accredited investor you have to wait a year. Not all invesments have a year life. The majority of our offeriings marture in 6 months of less.

I'm telling you Sam. Google "Real Estate Crowdfunding" or Title III JOBS act, and get back to me.

May 14, 2016 01:32 AM

John - there is no question this can work, but there are many risks involved and the concern is they will not be understood by the "everyday" investor (for lack of a better word, did not want to use "unsophisticated"). Also, this market will have no liquidity, so divesting of these shares will be difficult if not impossible. See the NY Times article dd 5/15/16 on the subject, it highlights the issues and concerns, which I share.

http://www.nytimes.com/2016/05/15/business/dealbook/new-crowdfunding-rules-let-the-small-fry-swim-with-sharks.html?_r=0

May 14, 2016 11:14 PM

Thanks for the comment. And great article...Title III model with $100 minimum there is no risk. And in at least my equity model The offering will pay off in 6 months. So really no lack of liquidity or no worse that 6 month CD.

This article makes no mention of Real Estate crowdfunding where investor's investment is secured by a hard asset. Nevertheless a good read.

Title III Real Estate crowdfund share can be sold in 1 year.

I think the average investor is ready to roll some of their 401K over. They might start with $100 to try it.

May 15, 2016 04:09 PM

JM Padron, CCIM, CCP, MRICS

LA ROSA CRE - Kissimmee, FL

CCIM, CCPP, CRB, MRICS

John,

Excellent article, thanks for sharing. I looked at crowdfunding when it was starting to get financing for developing an office building, unfortunately, at that time (about 4 years back)it was just starting and I found it very complicated. Can you guide me as how I should retake the project?

May 18, 2016 10:08 PM

I'll try...

May 19, 2016 07:58 AM

Real Estate Crowdfunding Investing - What is it? And Are You Ready?

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