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Real Estate and Crowdfunding: A New Path for Investors

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Innovations in real estate

Crowdfunding

By definition, crowdfunding should be a natural for the real estate market. In a word, crowdfunding makes use of the easy accessibility of vast networks of friends, family and colleagues through websites like Facebook, Twitter and LinkedIn to get the word out about a new business and attract investors. Crowdfunding has the potential to increase entrepreneurship by expanding the pool of investors from whom funds can be raised beyond the traditional circle of owners, relatives.

Real estate is already climbing aboard the crowdfunding bandwagon and are touting the relatively low-risk access to the Indian real estate market.

“Crowdfunding for real estate is not an entirely new phenomenon,” said theCommercial Real Estate Development Association  . “Numerous players have entered the field. Although each of these platforms has its own niche and strategy, with different levels of minimum investment, all are geared toward accredited investment who meet specific requirements for net worth and/or annual income. By contrast, crowdfunding will open the field to many smaller investors.”

What are the pros and cons of crowdfunding for investors? In a word, both sides come down to risk; specifically, how much investors want to absorb online.

According to the report, both real estate developers and investors can reap significant financial returns through crowdfunding, and both are able to spread their risks.

Pros . . .

  • Investors get access to the real estate market with small amounts of money.
  • Investors get to work directly with real estate developers and have a voice in the process.
  • Investors can choose which real estate projects in which they want to invest their money.
  • Investors have access to myriad projects, so choice and options aren’t a problem.

Cons . . .

  • Investors have the same issues as every real estate investor. If the market goes south, they will likely lose money.
  • The risk of investment default (from real estate developers) is higher for crowdfunding compared to peer-to-peer and direct real estate investment funding.
  • A lack of liquidity, as the absence of a secondary market restricts easy selling access for investors.

To get started with crowdfunding in real estate, Jillienne Helman, chief executive officer at Realty Mogul, advises going with a firm that’s going to be around for a while.

“First, work with a crowdfunding company that will survive,” she says. “That means well-capitalized. What scares me is the number of crowdfunding companies out there that are headed up by two students who just graduated from college, and who aren’t capitalized themselves.”

Darren Powderly, co-founder of CrowdStreet.com, says doing your due diligence is more important in real estate than other investments, as far as working with a crowdfunding company goes.

“From the investor’s perspective, one should take care to research the platforms on which they are searching for investment opportunities,” says Powderly. “Not all platforms are created equal, and multiple business plans are being tested in order to capitalize on this emerging trend.”

Powderly specifically advises investors to investigate the founders and senior management of the crowdfunding platform or firm to make sure they have a sterling reputation built upon their previous business experience.

“Key industry expertise in finance, real estate and technology is essential to operate a trusted and reliable platform,” he adds. “Investors should gravitate toward platforms that deliver excellent customer service not only during the fundraising process, but also after the deal is fully funded and closed. Despite the fact that there are 50-plus platforms in some mode of operation, there are only a half dozen or so that are emerging as leaders in the space. Investors should research multiple platforms and select their top three based on their investment goals and preferred user experience.”

Transparency is Critical

Powderly advises looking for crowdfunding platforms and sponsors that acknowledge the risks and provide an education-based approach to risk management. “Most real estate crowdfunding platforms today only permit accredited investors, as defined by the SEC, to invest,” he says. “Accredited investors are advised to invest amounts that they are comfortable with given their overall investment portfolio.”

Another tip – only invest in offerings from sponsors that you trust and that you’re confident will look out for your best interest in good times and bad.

“If an investor does not understand how their money is being used, the risk factors of the investment and what factors influence their return on investment, then they should seek the advice of their trusted investment adviser or pass on the investment,” adds Powderly. “There will be plenty of other investment opportunities to choose from, so don’t get rushed into making an uninformed investment decision.”

A professional real estate crowdfunding platform should provide investors with ample opportunities to communicate about the offering, including making introductions directly to the sponsor of the particular property listing.

Is This Doable, and How?

The catalyst to launching crowdfunding for real estate investments, along with other types of business ventures, was the passage of the JOBS Act in 2012. Until recently, the ability to advertise and solicit investors for real estate investments has been restricted. The JOBS Act (Title II) dramatically changed the way investment capital can be raised by modifying existing Regulation D rules, specifically those rules pertaining to how companies can offer and sell their securities without having to register the securities with the U.S. Securities and Exchange Commission (SEC).

In the past, Regulation D, Rule 506 placed restrictions on fundraising efforts – namely, limiting fundraising to only pre-existing relationships and preventing a sponsor or other party from openly soliciting or advertising those private investment opportunities. The new Rule 506(c) allows issuers, sponsors, syndicators and others who are raising capital from private investors to advertise those private-investment opportunities to accredited investors under certain conditions. That rule became effective Sept. 23, 2013. The new federal legislation represents a huge change for sponsors that are raising funds for a real estate acquisition or development. Essentially, Title II gives crowdfunding firms the green light to a direct market to a large pool of potential investors via social media and the Internet. It also has opened up a new vehicle for investors to more easily access direct real estate investment opportunities.

As Powderly notes, for the first time ever, investors have direct access to a selection of private real estate offerings where they can browse, research and make well-informed investment decisions online.

The Bottom Line

Crowdfunding in the real estate market promises to be a revolution that’s just now taking off, and it’s attracting serious interest from serious investors these days.

Source : investopedia

Technology

Appoint Housecraft App For Your Interior Designing Job

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Do you have a knack for interior designing? Did you always dream about being an interior designer but could never really get a head start at it? Is your home in a dire state for a revamp? Do you like to change your interiors often?

If your answer is yes then we have the perfect solution for you. The answer to your prayers is the refreshing Housecraft App. The app is available only on iPhone App Store for free.

It is a fairly easy app that can be used to design any interior living space with the choice of several pre-fed furniture and décor items. You can use your phone’s camera and watch the power of augmented reality to place fully rendered 3D models anywhere in your world.

For example if you want to redo your living room. All you have to do is open your phone camera and scan the room. You would be surprised at how accurately it takes measurements. It then lets you drop all the furniture you can think of. You can resize each object so you can customize it according to your room. Plus, you can admire objects from any angle, in any light! Once you achieve a set-up that you like, you can save it for later reference.

The app is a break through at many levels. To start with you design your own home and test it on the app so you can actually see the outcome of your design. For people who like to mix and match and change décor items on a regular basis can use this app for better visualization of their ideas. It is easy to save room configurations and try them out anywhere. Thus great help in apartment hunts, reorganizing a room, testing how new furniture will look, and more. With their video recording feature you can share your creations with your friends or family.

Also Read: 5 Real Estate Tech Startups in India You Can’t Ignore

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5 Real Estate Tech Startups in India You Can’t Ignore

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5 Tech Startups in India You Can’t Ignore

The real estate sector is one of the biggest contributors to the country’s economy. It is no wonder that the sector is booming with newest technologies that are changing the age-old industry norms and raising industry standards. Here are five tech start ups that you need to take note of:

NESTAWAY

5 Tech Startups in India You Can’t Ignore

If you have ever faced a rental problem and most of us have, this is the thing that you need. NestAway is India’s home rental network for singles that offers rental solutions via latest technology and best design.

Founded in January 2015, NestAway is an app that lets you find, book, pay, move-in and out of a rental home anywhere in India. They basically manage both parties in a rental situation and turn unfurnished houses in to furnished homes and offer them at affordable prices on sharing basis. Deepak Dhar, one of NestAway’s four cofounders, says “It’s a new concept for owners and a solution for tenants. Plus we’re solving the youth housing crisis of upwardly mobile urban migrants in cities.” It began in Bengaluru and today is spread in 9 metro cities of India.

Website: nestaway.com

NoBroker

5 Tech Startups in India You Can’t Ignore

A Bangalore based real estate search portal, NoBroker eliminates broker and directly connects flat owners and tenants. Founded in 2014, NoBroker claims to work on the basis of technology that identifies and abolishes brokers. Started as a rental platform, they have now forayed into brokerage free buy/sell property as well. They verify each listing to make sure they are owners and no middlemen. They offer maximum information in the most accessible format, thus saving you time, money and energy to actually go physically hunting for house.

Website: nobroker.in

SmartOwner

5 Tech Startups in India You Can’t Ignore

Find the biggest market for investors here; all the opportunities that you won’t find on general market. SmartOwner brings forward some of the carefully curated investment opportunities from the fastest growing cities in India. Projects are vetted by law firm after meticulous checks. It verifies all the listing to make sure the pricing and specifications are in line with the market trends. Thus it offers well calculated risk and returns. People benefit from the curated high-return opportunities.

Website: smartowner.com

Approach

5 Tech Startups in India You Can’t Ignore

Approach helps you to conveniently and accurately manage scientific data which enables you to grow your business strategically instead of hit and miss methods. Real estate is a growing sector and it needs such solutions where management can take accurate decision based on solid data. Approach lets you manage your inventory from any location. Cloud telephony lets you track all your campaigns and calls from anywhere. Automated SMS and Email Marketing allow you to connect with your audience and also offer in-depth analytics of click-rate and subscriber activity. You can now even calculate the returns on investment from all your media spending and campaigns.

Website: approach.one

GrabHouse

5 Tech Startups in India You Can’t Ignore

Established in 2013, Grabhouse is a no broker website that helps people find flats, flat mates and tenants quickly and without much effort. It is the first venture that is a 100 percent broker free house renting platform. It is able to achieve this by using powerful technologies that allow stakeholders to enhance their business. Their target group lies between 18-28 years; they are mostly students or young professionals who are looking for decent places to stay while saving a buck. Even on-ground assistance is provided after lead generation for a nominal fee.

Website: grabhouse.com

 

Also Read: Technology And Real Estate: Reaching New Heights

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Alibaba Now Enters Housing Rental Market In China

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Alibaba Now Enters Housing Rental Market In China

Alibaba, the Chinese e-commerce giant, signed an agreement with Zhejiang province to use the company’s technology in order to build an online system for house rentals. As per the agreement, this system will include all the apartments that are put up for rent by an individual, government, developers as well as agents.

The Xinhua news agency reported that the Hangzhou City in Zhejiang province will be able to use this application to seek houses on rent. The website by Alibaba will help people at every stage of the procedure, right from searching for a home to apartment contract signing and later payments.    

Han Junqing, director of Hangzhou Real Estate Registration Center, said, “Information on apartments, user reviews, and credit ratings of owners, renters, and agents will all be shared.”

The system is called the Smart House Renting System and will be supported by Alibaba’s technology, data, and commerce credit system. The government sources have revealed that it can prevent fraudulent deals.

At present, the housing rental market in China is dominated by real estate agents, and fraud and disputes are not uncommon in all the major cities. There are big real estate players with their own apps however that information is not shared with others.

People seeking homes for rents often have to refer to different apps and compare their offers as these companies lack the Zhima Credit from Alibaba subsidiary Ant Financial’s which is a much more mature credit system.

The government of China is prioritising the rental market’s development to rein in runaway home prices in the country’s big cities. The Central government chose Hangzhou among the first 12 cities to take bold reforms to boost the rental market.

Also Read: Technological Solutions That Are Helping The Commercial Real Estate Industry

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