Although in its infant stages, crowdfunding in the commercial real estate space has made leaps and bounds in just a few short years. Here is an analysis of the prominent players and what you should expect during the process.
Exposure: Dramatically increase the exposure of your equity opportunities to a wide international audience looking to invest in top 50 MSA locations.
Centralize: Centralize the offering by narrowing in on ONE platform to host the crowdfund, directing all interested parties to that platform.
Innovate: Begin taking the steps to move toward the future of capital raising.
Debt or Equity: First, decide whether you intend to pursue debt or equity funding.
Choose a Platform: Decide on a platform. All platforms differ in how they approach the underwriting process, how they structure deals for investors, and the requirements in place for borrowers and fundraising companies.
Proven Track Record: Depending on the platform, applicants need to prove that they have adequate history of involvement in successful projects. For example, Fundrise requires $100M worth of projects.
Apply: Submit your application. Be thorough in answering each question on the marketplace platform you choose. Some requirements include tax returns and deeds showing ownership of properties.
What Is The Expected Raise Timeline?
Every platform has different timelines, although you should expect the same as a traditional raise.
The only additional time required is the submission process, which could take up to 7 business days depending on the platform.
Equity partners who we do not meet on the platform can still place their equity using the platform we choose to use, which can speed up the raise.
Breakdown of the Best CRE Crowdfunding Platforms
- Open marketplace where sponsors and investors make connections, grow networks, carry out transactions, and do deals without all the institutional intermediaries and encumbrances that existed in the pre-JOBS Act era
- 20,000 accredited investors
- Facilitated over 130 different deals—18 of which are funds, with the rest being individual assets—in over 30 states and over 80 different cities.
- $10M – 100M in Top 50 MSA
- Sponsor must have $100M in real estate experience through sales or acquisitions
- Both Equity and Debt solutions
- Deals reviewed within 48 hours and underwriting within 4 weeks to close
- No prepayment penalty
- Over $1B raised
- Company assists with the marketing plan to attract the best investors
- Some deals have been financed within 24 hours of posting on the website
- Based in Austin TX, this platform requires the sponsor to have an already-existing pool of investors
- The website is a bit outdated and there are no success stories or stats on how many deals have been done through the platform
- Over $870M deployed to date, 1,160 transactions across 41 states with values over $2.7B
- Provides Common Equity, Preferred Equity, and Mezzanine Debt
- Up to 90% LTV
Are There Any Success Stories?
- CrowdStreet raised $25M in 3 hours for an Opportunity Zone project in Atlanta (September 2019)
- The World Bank predicts that in a few years the crowdfunding industry as a whole will be worth an estimated $93 billion. In the US alone, crowdfunding has grown by nearly 145%, with real estate making up a significant amount of that number.
- Crowdfunding: One of the Decade’s Success Stories