LOS ANGELES—Crowdfunding, while still in its early stages, continues to grow and gather momentum, said participants in the “Opportunities in Crowdfunding” panel during RealShare National Investment & Finance here last week. And, between cooling-off periods, third-party certification and the other hoops potential investors need to jump through before they can invest online, numerous measures are in place to prevent uncertified investors from investing through crowdfunding.
“Crowdfunding is a legitimate new way of investing,” said Elizabeth Kulik with ProHatch. “There’s a conservative approach among all platforms because no one wants the SEC as their new best friend.”
Christopher Rising, president and COO of Rising Realty Partners and a strategic investor in the Fundrise platform, said this type of investment method will only strengthen since “people want to have a say in investing in their communities. They want to see development done, and if they can say they’re an investor, that makes a difference. Crowdfunding is here, and it’s here to stay.”
Elizabeth Braman, CCIM, chief production office with Realty Mogul, called crowdfunding an “early industry, but not a new industry. It’s just a new medium for an old industry.” And Adam Hooper, CCIM, founder/CEO of RealCrowd, said that bringing efficiency to the process of real estate investing is one of the ultimate goals of crowdfunding, to which Kulik agreed.
Kulik recommended seeking platforms run by executives with a long history in the real estate industry, which is an important piece of the puzzle. “Digital marketing”—as she called crowdfunding—“is both an art and a science. Real estate is not a technologically savvy industry, but there’s a learning curve we have to get out of fast.”
Rising said his firm is “very focused on sponsors. We try to keep the charlatans out because all it takes is one bad deal.” He added that in up to 99% of deals, people are more concerned about with whom they’re investing than the deal itself.
While moderator Gene Trowbridge, CCIM, a syndication lawyer with Trowbridge Taylor Sidoti LLP, pointed out that fraudsters always use the Internet, Rising countered, “The Internet polices itself with Yelp and other such sites. The world is much more policeable in an Internet environment because the world sees the deals and can comment on them. Every regulator is looking at that.”
Braman said that every single person involved in a transaction on her firm’s site is getting deep background checks so they really know the sponsors. “Deals will go sideways sometimes, but that’s always the case in real estate. We’re doing a really good job to make sure fraud is not a problem.”