The Evolution of Real Estate Crowdfunding — Some Links
Real estate crowdfunding remains one of “fin-tech’s” hottest stories in 2016. While crowdfunding remains a tiny percentage of overall real estate debt or equity deals, the share continues to grow.
Aside from the pure real estate-related legal issues that confront all real estate enterprises, crowdfunding platforms face additional layers of potential problems arising from securities regulations (governing how their debt or equity offerings are presented to what has become a wide audience of investors), corporate law (governing their relationship with their investors, whether the chosen form is the all-popular LLC or some other vehicle), and the “wild west” aspect of having no industry-specific precedent to rely on for guidance.
There are still no signs of an avalanche of litigation, as some have predicted. But as the industry matures we can expect some of its contours to be shaped in courtroom battles.
Below are some links to articles outlining the continuing evolution of the real estate crowdfunding industry in 2016:
- This article from Bloomberg — Inside the Real Estate Crowdfunding Land Rush — makes the point that not all crowdfunding platforms are created equally (with vast differences in transparency, fees, and deal volume), and consolidation in the industry should be expected.
- This post by the founder and CEO of crowdfunding platform RealtyShares — A Beginner’s Guide to Real Estate Crowdfunding — summarizes the industry offerings and differences between platforms.
- This article from The Real Estate Crowdfunding Review — Investors pile into Fundrise’s new “eREIT” — takes aim at a new eREIT structure offered by one crowdfunding platform that, while innovative, suffers from a lack of transparency, high expenses, and substantial investor dilution.
- Another article from Real Estate Crowdfunding Review — 7 limitations of real estate crowdfunding sites — reviews some of the current limitations facing most platforms, some of which can be overcome with effort or tools, but others needing industry maturation.
- This article (and podcast) from Wharton — Is the Real Estate Crowdfunding Market Getting Too Crowded? — features an interview with RealtyMogul’s CIO Timothy Li discussing the business model and industry challenges.
- This article — Real Estate Crowdfunding: Should You Invest? — recaps some of the unique risks involved with real estate crowdfunding.
- This article — iFunding Sued. Real Estate Crowdfunding Company Calls Lawsuit Baseless — reviews an early example of litigation in the real estate crowdfunding industry, centered on a dispute over broker fees after a crowdfunding platform allegedly failed to raise the targeted amount for various real estate projects.
- Finally, this article from Real Estate Crowdfunding Review — Top 100+ Real Estate Crowdfunding Sites: Rankings and Reviews — provides rankings to distinguish the top real estate crowdfunding platforms from the pretenders.