The Explosive Growth in Real Estate Crowdfunding


Instead of the traditional financing that has been used for real estate investments in the past, more and more backers are using crowdfunding as a viable option. According to documentation on 2014 real estate crowdfunding, the industry has taken a giant leap forward thanks to the opportunity to purchase a slice of a real estate pie instead of the whole thing.

It’s not just the backers and the developers that are using real estate crowdfunding today either. Even people who flip homes are using crowdfunding to get their initial funding and then they’re providing backers with a return and pocketing the profits.

Everyone Is Getting Involved

The last 24 months have seen a lot of changes in the real estate crowdfunding market. It has gone from a niche experience where someone could put down $100 to get a share of the real estate pie to massive crowdfunding platforms that are being infused with cash from hedge funds and major companies.

CircleUp has become the largest angel investing platform that is located in the United States. Google and Union Square Ventures just put in a $7 million cash investment. Many people are still talking about the fact that potato salad crowdfunding earned $70,000, but real estate is a potential $27 trillion market. That’s why real estate crowdfunding has so much potential right now.

There’s Still One Giant Problem

The issue that is facing the real estate crowdfunding world is the same problem that all other equity crowdfunding ventures are experiencing: a delay in the issuance of rules. Title III of the JOBS Act is expected to be released in Q1 2016, which means it would be 4 years overdue. Until those rules come out, only accredited backers can put money into these crowdfunding platforms. Only 3% of accredited backers use crowdfunding.

What does this mean? 2014 might have seen explosive growth, but 2016 could be the year for real estate. This means 2015 is the year to plan for it, especially if the Title III rules are approved. With just $5,000 often required today for accredited backers, however, there are still great investment options to find right now. That should be considered too.