5 Takeaways from the Chicago Real Estate Crowdfunding Meetup

Leaders from 3 top platforms discussed the future of the industry.

On Wednesday, August 5, we were thrilled to have a packed house at the Real Estate Crowdfunding Education & Networking meetup event in Chicago’s West Loop. PeerRealty was proud to co-organize the event along with fellow real estate crowdfunding platforms Patch of Land and American Homeowner Preservation (AHP). A special thanks to all the attendees and our co-organizers, along with Chicago REIA for sponsoring the event and WeWork for hosting it.

Along with some great networking, there was also a panel featuring top executives from all three platforms. PeerRealty, Patch of Land Co-Founder and CTO Brian Fritton, and AHP CEO Jorge Newbery all discussed the current state of real estate crowdfunding and how they see the industry evolving in the future. Here are five key takeaways from this discussion of real estate crowdfunding industry leaders:

Technology is changing real estate, and the crowdfunding industry is at the forefront of this change. The panelists explained that their crowdfunding platforms are taking full advantage of the efficiencies offered by technology and by big data. Patch of Land’s Brian Fritton noted that his platform utilizes over 4,000 data points in making loan underwriting decisions. Despite all this data, the underwriting process is actually much quicker and more efficient than a traditional underwriting process. PeerRealty added that the nature of crowdfunding also adds efficiencies, saying that “

e can now take those data points and get immediate feedback from investors on whether this [deal] is a deal that that the market will support.”

Expect minimum investments to come down in the near future. All three panelists agreed that minimum investment amounts on real estate crowdfunding platforms will be reduced as the investor base broadens. AHP’s Jorge Newbery said that his platform will be rolling out an offering in the coming months (likely a Reg. A+ offering) with a minimum investment amount of $100, which he calls “crowdfunding for the 99%.” Fishfeld argued that the low minimum investment requirement on crowdfunding platforms is vital for investors to properly diversify their portfolios.

There is a surprising degree of cooperation among different real estate crowdfunding platforms. Some observers wonder if the real estate crowdfunding industry will eventually be dominated by a few large, national platforms. All of the panelists, though, stressed that real estate is such a mammoth industry that there will be room for many platforms with areas of different focus. Fishfeld said that he’s “excited about the collaboration we’re seeing from a lot of the different portals, which allows sponsors to quickly and efficiently raise their entire capital stack.” In part, this is due to the fact that these three platforms have completely different areas of focus, but a lot of it is because they all see the benefit of crowdfunding when compared to how things had been done.

Real estate crowdfunding offers several advantages to investors that REITs fail to offer. One of the most common questions we receive from potential investors is about the difference between real estate crowdfunding and REITs. Unsurprisingly, an attendee asked the panelists to describe the differences. Fishfeld explained that the initial benefit of real estate crowdfunding (as compared to publicly traded REITs) is “true diversification outside of the public securities market.” He also noted that investors “get to select the deals [they] want to be in.” Fritton expanded on this theme, saying that in his experience “people really like specificity; they like knowing what deal they’re investing in.” Newbery concluded the discussion by pointing out that REITs have professional Wall Street managers, and “those Wall Street managers tend to charge a lot.”

Real estate crowdfunding offers unique benefits to sponsors and developers. Many attendees at the meetup were potential sponsors seeking to learn more about crowdfunding as a source of capital for their deals. Fritton said that Patch of Land’s use of technology and data allows them to make lending decisions in days rather than weeks. Newbery emphasized the importance of this point, noting that prior to crowdfunding, he (like most sponsors and developers) previously had to rely upon a small handful of high-net worth investors to fund his projects. Inevitably, there would be occasions when these investors stalled in making their investment decisions, delaying and even killing projects. Crowdfunding allows real estate sponsors to tap a much larger base of investors to fund projects, and as Newbery noted, sometimes time is just as important as money in the real estate industry.

Thanks again to everyone who attended the event, as well as to Patch of Land and AHP for co-hosting with us! Miss the event? Fear not, you can watch the panel discussion below.

5 Takeaways from the Chicago Real Estate Crowdfunding Meetup

Leaders from 3 top platforms discussed the future of the industry.

Related Posts