Real Estate & Crowdfunding: Understand Your Strengths

By Lauren Keyson and Barbara Gesteira

FundingPost & the Soho Loft’s Real Estate Investing & Crowdfunding Conference was not a standard real estate event. It was more an opportunity to meet and chat directly with real estate investors, real estate technology Investors, and real estate crowdfunders. We talked with David Drake, founder and Chairman of LDJ Capital in NYC and founder of The Soho Loft (TSL) Media Group, who has been involved in realty, among other industries. He gave an overview of the day and what they tried to accomplish.

David Drake: Held at First Republic Bank’s mid-town office, the event was a discussion with a mixture of people — family offices, real estate investor groups, real estate funds and someone with two to five hundred dollars under management. One of the topics was, ‘How to Get Alternative Financing’.

Now the goal is to create the marketplace to the publications that we have and the events we are doing and the education we do, to show the real estate investors and developers, globally or locally, how they can use alternative finance means and the new Jobs Act – the startup business act for startups to raise money differently from the past. It’s a convoluted space. They heard from us how 10 different platforms are doing it 10 different ways; and also seeing how 10 different objectives of raising money should be considered. 

What Raising Money Means

Raising money online means that by being a public organization viewed publicly, people are going to want to see a corporate profile, a corporate identity and an online presence, which as a private investor or a developer they never had to do. So they have to consider that ‘Hey — you are becoming a publicly reviewed entity when you go online.’ Coca-Cola has investors buy shares from eTrade through Click, because they know the brand and they have seen it enough to know that it is a real company.

The same thing applies to a crowdfunding for real estate. You have to make the decision. What is the purpose? Do you really want to go into a world where you have to have a corporate identity and a profile and show your books and have transparency? Or do you want to continue doing your real estate transactions the way you do? Maybe there are alternative ways for you to leverage technology without using crowdfunding, such as having a button for an electronic signature such as having a data room to allow people to look at the documentation and track it; such as automated anti-money laundering technologies allowing you to plug it into your fund’s website.

So it is important as I see a lot of developers and people looking for real estate to recognize, what do they enjoy doing? If they enjoy taking, buying, flipping and working with properties, then a crowdfunding platform should be a means for them to raise more money but not something they want to do themselves. If they want to be in the VC world and raise funds for multiple startups such as venture capital in a crowdfunding platform, then they want to act as a startup that is looking for multiple value in their own company.

Understand the Ecosystem

What we accomplished at this event was to explain that there are 10 to 15 different alternative financing methods and objectives with crowdfunding for real estate. First of all, there is the need to understand that eco-system, and secondly, to understand what they want to continue doing and where they want to go with their own businesses. All the panelists including me were able to help everybody understand who they are and what their strengths are then understand what is available through education and working with the groups that attended and spoke at this event. We advised them to read up on the Soho Loft site where we write about this on an ongoing basis. Then there are our Times Impact publications where we write about crowdfunding for real state on a global basis. There is a place for technology to fit into all organizations that are looking for capital of some sort, whether it is public or private.

Italy is the only country in the world today that actually has passed a law that specifically outlines that it is crowdfunding for equity being allowed. So that is the only law in the world that passed that actually is a crowdfunding for equity law. Everybody else in the world is using exemptions in the law to crowdfund, but that’s not a law that was written specifically for crowdfunding for equity. It’s more like, ‘If you only take 27 investors in Australia, then we don’t care if they are poor or rich and it is okay’. It wasn’t written as a crowdfunding law. And 27 is not really a crowdfunding although the Australian ASSOB uses it that way. But 27 investors, really? What I am saying is that crowdsourcers have to get in and dissect each country’s regulatory framework, which I have been doing for the last four years.


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