Finding the Right Crowdfunding Platform

Mike: Welcome back to the flipnerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.

Nav: Hey, how’s it going today? My name is Nav Athwal, Founder and CEO of Realty Shares, an online marketplace for real estate investing. I’m really excited to be here today in the REI classroom to tell you a bit about how to choose the right crowdfunding platform for your project in your business. It’s a really exciting topic and I’m looking forward to chatting with you about it.

Mike: This show was sponsored by passiverental.com

Nav: In choosing a crowdfunding platform to raise capital through, there are a lot of different considerations that a sponsor or borrower needs to keep in mind. There a lot of crowdfunding platforms out there, as you probably know. There’s a lot of noise, but the number one most important factor is does that crowdfunding platform actually fund the type of project you’re looking to finance. Some platforms are debt only, some are equity only, some focus on commercial, some focus on residential. So if you’re looking to finance a commercial property and you go into a residential only platform, it’s not a really good fit.

At Reality Shares, we focus on providing a variety of options for operators. We will fund both debt and equity for residential and commercial properties. We’re unique in that aspect because a lot of platforms only focus on resident or commercial or debt or equity, as I mentioned.

The second thing you want to evaluate is what’s the crowdfunding platform’s involvement with my deal, not only during the funding process but also after the deal’s funded? Some platforms have the model that they connect investors and operators, but they don’t stick . . . get involved in the actual capital formation or post-funding management of those investors. So you’re essential are getting connected directly with investors and will have to manage those investors once you’ve raised capital.

Were as with platforms like Reality Shares, the platform will actually create a single-purpose entity in a structured in through investors will invest and that S.P.E. will be a single investor in your deal either as a lender or equity investor. So that way, you’re shielded from investors and even the post-funding management of those investors are handled by platform. So that’s an easier, more efficient way to raise capital and manage that capital on a post-funding basis.

Finally, I think track record of the platform is very important. If you’re looking to raise capital, you want to know how many deals has this platform they funded in the past, what’s their track record, how many have been successful, how many have failed, what’s the largest raise they’ve done, what’s the smallest raise they’ve done. This is all relevant to you to see if the project you’re currently looking to fund through the platform fits some of the historic investments they’ve funded and also whether the platform has had success in funding projects in the past or if it’s a new platform that really hasn’t established a network of investors just yet.

Finally, I think you want to know who’s on the team. I think getting your deal from start to finish and the timing of getting it from start to finish really depends on who’s running the company and the investment professionals that’ll help underwrite and review your deal. So if the platform is just a bunch of engineers, for example, they may not have the same know-how and understanding of your deal as if there are key real estate professionals as part of the management team. But those are some of the considerations you should keep in mind as you evaluate the crowdfunding platform that’s the best fit for your project and yourself on a go forward basis.

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Please note, the views and the opinions expressed by the individuals in this program do not necessarily reflect those of flipnerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions, as real estate investing can be risky.

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