At its core, crowdfunding means pooling money together from a
group of investors to make an investment. In this sense, crowdfunding has
existed in real estate for centuries. Neighbors have bought property together,
husbands and wives and their sisters and brothers have collectively bought
property and even multiple institutions have come together to collectively
purchase property.
The major difference between collective real estate investing of
the past and crowdfunding for real estate today is the ability to transact
online and the unparalleled access to deal flow by using the internet as the
new distribution platform.
Given the advances in modern technology, investors can now
browse investments online, transfer funds and have access to investor
dashboards to watch how investments are performing.
Rather than doing diligence on hundreds of real estate
transactions to find one to invest in, investors can browse lists of
pre-curated investments through crowdfunding companies.
While the bankless business finance industry eagerly waits
non-accredited crowdfunding as a result of Title III of the JOBS act,
crowdfunding for real estate with accredited investors has already begun.
This new way of real estate investing all starts with curated
transactions and Dango Estate reviews every transaction in-house. We go to
great lengths to fully understand the variables of each transaction including
the structure, the market statistics, the property, the quality of the property
and the track record, reputation and quality of the real estate development
company we are working with.
We also run background, criminal and credit checks to gain
comfort with the real estate investment companies and their management teams.
While no crowdfunding company can guarantee the success of any investment, and
risks certainly do exist, curation is becoming a very important aspect of
crowdfunding and should lead to greater protection for investors.
At dangoestate.com, we
only work with best-in-class operating partners who have a history and a track
record of being successful in real estate. They are not hobbyists, but rather,
real estate professionals who have sometimes been in the business for
centuries.
Once we find a best-in-class operating partner and a transaction
that we are interested in, we set up a single purpose entity, like a Limited
Liability Company (LLC). This protects investors from any additional liability
beyond their initial investment and it is not uncommon in real estate today for
companies to open up a separate LLC for each property they own or invest in.
Investors pool money into this LLC and by owning “shares” in the LLC, they are
then entitled to share in the benefits of investing in the property.
Crowdfunding for real estate enables more investors to have
access to pre-vetted real estate investments that were historically unavailable
outside of close-knit circles. It also allows enables investors to write
smaller check sizes.
In the past, many of these best-in-class operating partners
would not accept a check smaller than $100,000 or $250,000. By pooling money
together online, investors can invest as little as $30.
By opening up the real estate investing world to a broader range
of investors, it allows more and more people to benefit.
Rather than dealing with the hassles of property ownerships
themselves like toilets, tenants and trash, investors now have access to real
estate investments that allow them to earn passive cash-flow, all secured by a
physical property.
