In 2016, the real estate crowdfunding industry produced 3.5 billion dollars in a market that has largely gone unnoticed. It’s anticipated by 2025 that the industry is going to be valued at more than 300 billion. Three trends emerged in 2017 that can help the informed investor understand the best approach to this dynamic and explosive industry.
Entering into the real estate crowdfunding industry is relatively simple for investors who are interested in properties requiring smaller amounts of capital. When large groups of people come together each with their own amount to invest and they pool their resources, they’re better able to handle larger properties. This shift toward institutional capital is a no-brainer for real estate crowd funding because it helps to accelerate growth by better serving the supply side of the equation. However, it’s important to keep in mind that approaching the institutional capital sector should be done with caution. Most importantly, real estate crowdfunding should create a determined base of foundational investors and make sure that there are impenetrable underwriting standards in place to make sure that each deal is done correctly.
For those who aren’t familiar with the term, Title III of the JOBS Act allows real estate crowdfunding to include non-accredited investors, which means that online marketplaces are now able to take advantage of this regulation. The influx of Reg A+ eREITs from online platforms now indicates that it is on track to raise over two hundred million dollars. It’s true that non-accredited investors might not have as much liquidity as their accredited colleagues, but they outnumber those investors. Therefore, there’s an immediate and very real opportunity for online marketplaces.
Because of its widespread popularity, there seem to be new platforms emerging every day within the framework of real estate crowdfunding. However, it’s important to keep in mind that just because a platform exists, it doesn’t mean it’s equipped to handle business. Of course, as with any industry that is this young, there are going to be countless starts and stops as it continues to gain speed. It’s really vital to keep an eye on the tech industry in conjunction with real estate crowdfunding because, let’s face it, one can’t exist without the other. It’s reasonable to assume that tech and all the applications associated with real estate crowdfunding is going to be a driving force in determining the success of individual platforms.
As this natural thinning out of the herd continues, it’s highly expected that a few choice platforms will come out the victors. This is only to be expected and shouldn’t come as a shock to anyone watching the industry. When that occurs, it’s going to mean that a few choice platforms are going to have their hands in billions of dollars worth of real estate. There’s still plenty of room to grow, considering the real estate market is valued somewhere in the trillions.