Which Investors Are Fit for Crowdfunding?

Crowdfunding is rounding the six-year anniversary of its induction into the real estate capital stack, but crowdfunders are still educating audiences about the process and benefits of new capital source. The second-annual Crowdinvest Summit—which explores all crowdfunding platforms—gave real estate crowdfunders the opportunity to address potential investors and entrepreneurs. The real estate investment panel, one of two real estate-focused panels during the two-day conference and included Clay Malcolm of New Direction, real estate attorney Jillian Sidoti, Adam Kaufman of ArborCrowd, Matt Schuberg of RealCap, discussed the traits investors should look for in a crowdfunding platform.

“I think that transparency is one of the biggest things that investors should look for in a crowdfunding platform,” Schuberg, co-founder and CEO of RealCap, tells GlobeSt.com in an interview following the panel discussion. “One of the things that you want to look for is how transparent the company is upfront with fees and expenses. You don't want to do business with a company that is hiding that in their offering document. That is a big importance. The other biggest thing is the track record. You need to make sure that there is a strong background and that the platform has done this before.” To ensure transparency, the panel moderator, Amy Wan, founder and chief legal hacker at Bootstrap Legal, asked each of the panelists to explain their fees.

As a bit of education, the panelists also explained what types of investors would benefit most from real estate crowdfunding. “Crowdfunding is really for someone that is looking for a passive investment rather than an active investment,” says Schuberg. “With real estate crowdfunding, you have more control compared to a stock or mutual fund, but you still shouldn't expect to have too much control. At the end of the day, the manager at the company is going to be the one making the investment decision.”

The panel was appropriately diverse with speakers representing different niches within real estate crowdfunding. RealCap focuses on the self-storage market, and as a result, tends to attract more educated investors. “We are definitely targeting a smaller market, but the investors that we do get interest from have a pretty good understanding of self-storage,” explains Schuberg. “It definitely detours some investors away that don't understand self-storage or that aren't interest, but the ones that are, it seems like they have a higher interest than a broad focus. It is also much easier to explain our value proposition to our investors that way.”

The Crowdinvest Summit launched last year, and gives crowdfunders the opportunity to speak to an investment audience about the new capital source. This year, the conference attracted fervent interest. “The conference was huge this year. I believe it was more than double last year, and the audience was really enthusiastic about getting involved in crowdfunding,” says Schuberg. “For that reason, we focused on what investors should look for in a platform and what types of investors should invest in real estate crowdfunding. It is beneficial to people that don't have experience or confidence to do it on their own. Crowdfunding allows those people the ability to partner with a real estate professionals who have a lot of experience and learn as they go with a crowdfunding platform.”

Crowdfunding is rounding the six-year anniversary of its induction into the real estate capital stack, but crowdfunders are still educating audiences about the process and benefits of new capital source. The second-annual Crowdinvest Summit—which explores all crowdfunding platforms—gave real estate crowdfunders the opportunity to address potential investors and entrepreneurs. The real estate investment panel, one of two real estate-focused panels during the two-day conference and included Clay Malcolm of New Direction, real estate attorney Jillian Sidoti, Adam Kaufman of ArborCrowd, Matt Schuberg of RealCap, discussed the traits investors should look for in a crowdfunding platform.

“I think that transparency is one of the biggest things that investors should look for in a crowdfunding platform,” Schuberg, co-founder and CEO of RealCap, tells GlobeSt.com in an interview following the panel discussion. “One of the things that you want to look for is how transparent the company is upfront with fees and expenses. You don't want to do business with a company that is hiding that in their offering document. That is a big importance. The other biggest thing is the track record. You need to make sure that there is a strong background and that the platform has done this before.” To ensure transparency, the panel moderator, Amy Wan, founder and chief legal hacker at Bootstrap Legal, asked each of the panelists to explain their fees.

As a bit of education, the panelists also explained what types of investors would benefit most from real estate crowdfunding. “Crowdfunding is really for someone that is looking for a passive investment rather than an active investment,” says Schuberg. “With real estate crowdfunding, you have more control compared to a stock or mutual fund, but you still shouldn't expect to have too much control. At the end of the day, the manager at the company is going to be the one making the investment decision.”

The panel was appropriately diverse with speakers representing different niches within real estate crowdfunding. RealCap focuses on the self-storage market, and as a result, tends to attract more educated investors. “We are definitely targeting a smaller market, but the investors that we do get interest from have a pretty good understanding of self-storage,” explains Schuberg. “It definitely detours some investors away that don't understand self-storage or that aren't interest, but the ones that are, it seems like they have a higher interest than a broad focus. It is also much easier to explain our value proposition to our investors that way.”

The Crowdinvest Summit launched last year, and gives crowdfunders the opportunity to speak to an investment audience about the new capital source. This year, the conference attracted fervent interest. “The conference was huge this year. I believe it was more than double last year, and the audience was really enthusiastic about getting involved in crowdfunding,” says Schuberg. “For that reason, we focused on what investors should look for in a platform and what types of investors should invest in real estate crowdfunding. It is beneficial to people that don't have experience or confidence to do it on their own. Crowdfunding allows those people the ability to partner with a real estate professionals who have a lot of experience and learn as they go with a crowdfunding platform.”