Crowdfunding For Commercial Real Estate Investors

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Crowdfunding is becoming an increasingly hot trend in real estate. So can it really work, what are the advantages, and what tips can help make campaigns more successful?

Proving it is far from a fad crowdfunding continues to gain steam and even increase in popularity, especially in the real estate investment industry. It is still a brand new concept to many but it does have its advantages, even for those with far more cash than they need.

For those still completely new to the concept crowdfunding as the name suggests involves obtaining funding from the crowd to finance an acquisition, development, or improvements versus turning to a more conventional lending source.

There are several types of crowdfunding which range between giving up an interest in property or the holding entity to being structured as a loan to the more common donation form of crowdfunding seen used on Kickstarter.com.

It certainly works. Thousands of projects have been funded with millions of dollars via a rapidly growing buffet of peer-to-peer funding platforms. It can take some effort, attention and a little strategy, but it is absolutely worth it.

Everything under the sun and beyond is being funded in this way today from wearable tech, to books, indie films, new businesses and of course commercial real estate. Any type of real estate project can be financed in this way from raw land to retail property, office buildings, multifamily apartment buildings and portfolios of single family rentals. And browsing some of the wild ideas others are funding and just how much they are raising it should be a no-brainer for those with capital to put their money into something tangible and of value versus some of the other options out there.

There are many benefits to crowdfunding for commercial real estate investors in Massachusetts, even if there are other financing options on the table or investors are flush with liquidity.

This includes:

  • Increasing the buzz around a project
  • Lowering risk
  • Increasing ROI with leverage
  • Can eliminate the burden and profit killing interest of mortgage borrowing
  • Enables investors to take on deals with bigger spreads and convert them into high yielding cash flow investments

The Massachusetts real estate market is booming again, becoming a hot spot for international investors, financial firms and retailers like MakerBot 3D printing stores.

To increase the chances of success for your capital campaign consider:

  • Building up an online social following
  • Enrolling the help of a professional copy writer to paint your project in the best like and effectively communicate your message
  • Emphasis the positive effect the project can have on the community
  • Show transparency and increase credibility by outsourcing services like property management to established local MA firms.